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...

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...

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...

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...

This note explains the diverging trends between real and nominal aggregate inventory-sales ratios. The combined effect of two features of the data explains the divergence. First, while aggregate sales include both goods and services, inventories include only goods. Second, there has been a...

Product availability impacts many industries such as transportation, events, and retail, yet little empirical evidence documents the importance of stocking decisions for firm profits, vertical relationships, or consumers. We conduct several experiments, exogenously removing top-selling products...

The large, persistent fluctuations in international trade that can not be explained in standard models by changes in expenditures and relative prices are often attributed to trade wedges. We show that these trade wedges can reflect the decisions of importers to change their inventory holdings....

How do microeconomic frictions and microeconomic heterogeneity affect macroeconomic dynamics? We revisit the recent claim in the literature that nonconvex capital adjustment costs do not matter for aggregate dynamics. We argue that the neutrality of fixed adjustment frictions in general...

Real rigidities that limit the responsiveness of real marginal cost to output are a key ingredient of sticky price models necessary to account for the dynamics of output and inflation. We argue here, in the spirit of Bils and Kahn (2000), that the behavior of marginal cost over the cycle is...

Fixed transaction costs and delivery lags are important costs of international trade. These costs lead firms to import infrequently and hold substantially larger inventories of imported goods than domestic goods. Using multiple sources of data, we document these facts. We then show that a...