We study the effects of news shocks on inventory accumulation in a structural VAR framework. We establish that inventories react strongly and positively to news about future increases in total factor productivity. Theory suggests that the transmission channel of news shocks to inventories works...

This paper identifies total factor productivity (TFP) news shocks using standard VAR methodology and documents a new stylized fact: in response to news about future increases in TFP, inventories rise and comove positively with other major macroeconomic aggregates. The authors show that the...