A simple real linear-quadratic inventory model is used to determine how cost and demand shocks interacted to cause fluctuations in aggregate GNP and inventories in the U.S., 1947-1986. Cost shocks appear to be the predominant source of fluctuations in inventories, and are largely responsible for...

Casual examination of annual postwar data on inventories and aggregate output for seven developed countries -- Canada, France, West Germany, Italy, Japan, United Kingdom, United States -- suggests that in these countries the primary function of aggregate inventories is not to smooth aggregate...

It is shown that GNP will have an autoregressive root very close to unity in a variant of Taylor's (1980a,b) overlapping wage contracts model, for stylized versions of simple money supply rules and plausible values for the model's parameters. In this variant, monetary policy is the only reason...