This paper develops and applies a novel test of the Holt, et al.(1961) linear quadratic inventory model. It is shown that a central property of the model is that a certain weighted sum of variances and covariances of production, sales and inventories must be nonnegative. The weights are the...

This paper compares nominal income and monetary targets in a standard aggregate demand - aggregate supply framework. If the desirability of policies is measured by their effect on the unconditional variance of output, nominal income targeting is preferable if and only if the aggregate elasticity...

This paper compares the cyclical and secular behavior of Japanese and U.S. inventories at the aggregate and sectoral level, 1967-1987. While, as is well known, U.S. inventories are sharply procyclical, Japanese inventories are only mildly procyclical. In neither country do inventory and sales...

An aggregate demand - aggregate supply framework is used to analyze the effects of Japanese monetary policy, 1973:1-1990:8. It is found that money supply shocks contribute relatively little to output variability over the sample as a whole. Nor do these shocks seem to be particularly marked...

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...

A simple real model is used to decompose movements of aggregate inventories and output in Japan during 1975 to 1987 to three components, one due to cost shocks, one due to demand shocks, and one due to' shocks from abroad. Cost shocks are estimated to account for about one tenth of the movement...

This paper uses a variance bounds test to see whether consumption is too sensitive to news about income to be consistent with a standard permanent income model, under the maintained hypothesis that income has a unit root. It is found that, if anything, consumption is less sensitive than the...

This paper considers regression-based tests for encompassing, when none of the models under consideration encompasses all the other models. For both in- and out-of-sample applications, I derive asymptotic distributions and propose feasible procedures to construct confidence intervals and test...