The basic assumption of this paper is an attempt to be specific about price formation while retaining a fixed-price, quantity-constrained equilibration in the short-run. The second theme of this paper is the role of inventories in macrodynamics a topic of long-recognized importance, but one...

The simplest macroeconomic models in which markets clear instantaneously, and expectations are rational preclude the existence of "business cycles," that is, of serially correlated deviations of output from trend. This paper studies one of several mechanisms that can be used to make these...

We review and interpret recent work on inventories, emphasizing empirical and business cycle aspects. We begin by documenting two empirical regularities about inventories. The first is the well-known one that inventories move procyclically. The second is that inventory movements are quite...

Econometric aspects of recent research on inventory models are surveyed. The discussion emphasizes issues relevant to instrumental variables estimation of a first order condition of the Holt et al. (1960) linear quadratic inventory model, including choice of instruments, covariance matrix...

Entrepôts are hubs that facilitate trade between multiple origins and destinations. We study these entrepôts, the network they form, and their impact on international trade. We document that the trade network is a hub-and-spoke system, where 80% of trade is shipped indirectly--nearly all via...

We present and test an explanation for lags in the adjustment of wholesale gasoline prices to changes in crude oil prices. Our simple model with costly adjustment of production and inventories implies that output prices will respond with a lag to cost shocks even in the absence of menu costs,...

The increasing importance of intermittent renewable energy sources suggests a growing importance for energy storage as a way of smoothing the variable output. In this paper I investigate factors affecting the amount of energy storage needed, including the degree of intermittency and the...

Manufacturers' finished goods inventories move less than shipments over the business cycle. We argue that this requires marginal cost to be more procyclical than is conventionally measured. We construct, for six manufacturing industries, alternative measures of marginal cost that attribute...

If stock-outs are ignored and if demand shocks are additive, then optimal behavior requires that the marginal cost of production (MC) be equated with the expected marginal revenue of increasing expected sales by one unit (EMR). However,with more general demand shocks (and still ignoring...

The message of this paper can be summed up in two words: inventories matter. They matter empirically, in the sense that inventory developments are of major importance in the propagation of business cycles; and they matter theoretically, in the sense that recognition of their existence changes...