This paper uses a panel of UK manufacturing firms to examine whether the effect of cash flow on inventory investment reflects the presence of financially constrained firms. Financially constrained firms are identified using a number of criteria, including the criterion suggested by Bond and...

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...

Manufacturers' finished goods inventories are less cyclical than shipments. This requires marginal cost to be more procyclical than is conventionally measured. In this paper, alternative marginal cost measures for six manufacturing industries are constructed. These measures, which attribute...

We study the aggregate implications of (S,s) inventory policies in a dynamic general equilibrium model with aggregate uncertainty. Firms in the model's retail sector face idiosyncratic demand risk, and (S,s) inventory policies are optimal because of fixed order costs. The distribution of...

We estimate a DSGE model with (S,s) inventory policies. We find that (i) taking inventories into account can significantly improve the empirical fit of DSGE models in matching the standard business-cycle moments (in addition to explaining inventory fluctuations); (ii) (S,s) inventory policies...

Time-to-build, time-to-produce, and inventory have important implications for asset prices and quantity dynamics in a general equilibrium model with recursive preferences. Time-to-build captures the delay in transforming new investments into productive capital, and time-to-produce captures the...

This paper presents and applies a stage-of-fabrication inventory model to the UK manufacturing sector. The model emphasises the interaction between input (raw materials and work-in-process) and output (finished goods) inventories. This interaction is an important empirical regularity and proves...