Inventory fluctuations play an important role in the formation of business cycles. In Germany, little research has been dedicated to this topic recently. In this study, a structural times series model in the tradition of Harvey (1989) is employed to decompose German inventory investment into...

Using aggregate data, the paper analyzes the importance of inventory investment for German business cycles since 1960. In contrast to U.S. experience, the traditional productionsmoothing/ buffer-stock model is not rejected by empirical evidence. Preliminary national accounts data of inventory...