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 …

inventories: materials (input) inventories facilitate the production of finished goods, while finished goods (output) inventories … cyclicality of inventory investment and inventory-to-target ratios. Although inventories are an important element of the model … parameters associated with inventories, such as the input inventory to output ratio, play a small role in reducing the volatility …

leads to a procyclical shadow value of inventories, which acts as an automatic stabilizer that discourages sales in booms …

quicker response of inventories to monetary policy and commodity price shocks buffers production from fluctuations in sales to …

, inventories have fallen far behind rapidly advancing sales. What accounts for the change? Market trends have both reduced the need … for inventories and slowed the response of inventories to shifts in demand. At the same time, the long current expansion …