This paper introduces inventories in an otherwise standard Dynamic Stochastic General Equilibrium Model (DSGE) of the … business cycle. Firms accumulate inventories to facilitate sales, but face a cost of doing so in terms of costly storage of … intermediate goods. The paper's main contribution is to present a DSGE model with inventories that is estimated using Bayesian …

This paper introduces inventories in an otherwise standard dynamic stochastic general equilibrium model. Firms … accumulate inventories to facilitate sales, but face a cost of doing so in terms of costly storage of intermediate goods. Based … inventory dynamics has a significant impact on parameter estimates and the following analyses. We find that inventories enter …

materials, for both production as well as for inventories. The more detailed treatment of inventory holdings offers new insights …

Economic theory predicts a negative relationship between inventories and the real interest rate, but previous empirical … inventories and the interest rate ?are unlikely to uncover a relationship. Our analysis suggests that inventories will not respond … predictions and show a highly significant long-run relationship between inventories and the interest rate, with an elasticity of …