countercyclical stock-to-sales ratio over the business cycle, and (iv) more volatile input inventories than output inventories …. However, contrary to common beliefs, the model predicts that inventories are stabilizing, rather than destabilizing. The … volatility of aggregate output could rise by 30% if inventories were eliminated from the economy. Key to this seemingly counter …

countercyclical stock-to-sales ratio over the business cycle, and (iv) more volatile input inventories than output inventories. It is …- avoidance motive leads to procyclical liquidity-value of inventories (hence, procyclical relative prices of output), which acts …

We develop a general-equilibrium model of inventories with explicit micro-foundations by embedding the production … shocks have incentives to bunch production and smooth sales by carrying inventories. The optimal inventory target of a firm … yields novel predictions for the role of inventories in macroeconomic stability: Inventories may not only greatly amplify but …

We estimate a DSGE model with (S,s) inventory policies. We find that (i) taking inventories into account can … important than technol- ogy shocks in explaining the business cycle once inventories are incorporated into the model. An …

leads to a procyclical shadow value of inventories, which acts as an automatic stabilizer that discourages sales in booms …