Inventories and Optimal Monetary Policy

Lubik, Thomas A.; Teo, Wing Leong

doi:10.2139/ssrn.1668128

Cited by 7 publications

(7 citation statements)

References 34 publications

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“…In these models, a contractionary monetary policy shock leads to an increase in inventories, just as the empirical results in this paper predict (see Jung and Yun, ) and Lubik and Teo (, Figure ). One problematic issue in these models is that a contractionary policy shock can counterfactually raise output.…”

Section: Discussion: a Roadmap For Inventory Modelingsupporting

confidence: 71%

Sales, Inventories and Real Interest Rates: A century of Stylized Facts

Benati

Lubik

2014

J of Applied Econometrics

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SUMMARYWe use Bayesian time‐varying parameter structural vector autoregressions with stochastic volatility to investigate changes in reduced‐form and structural correlations between inventories and either sales growth or the real interest rate in the USA during both the inter‐war and post‐World War II periods. We identify four structural shocks by combining a single long‐run restriction to identify a permanent output shock with three sign restrictions to identify demand‐ and supply‐side transitory shocks. We show that during both the inter‐war and post‐war periods the structural correlation between inventories and real interest rate conditional on identified interest rate shocks is systematically positive; the reduced‐form correlation between the two series is positive during the post‐war period, but in line with the predictions of theory it is robustly negative during the inter‐war era; during that era the correlations between inventories and either of the two other series exhibit a remarkably strong co‐movement with output at business cycle frequencies. Copyright © 2014 John Wiley & Sons, Ltd.

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Section: Discussion: a Roadmap For Inventory Modelingsupporting

confidence: 71%

Sales, Inventories and Real Interest Rates: A century of Stylized Facts

Benati

Lubik

2014

J of Applied Econometrics

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“…A value of g of 0.491 is also within the range of 0.37-0.89 considered by Jung and Yun (2005). 16 Lubik and Teo (2009) find similar pattern of labor hours in a closed economy model. Chang et al (2009) similarly find that labor hours can increase in response to a technology shock in a New Keynesian model when firms hold inventories.…”

Section: Dynamics Of the Modelsupporting

confidence: 57%

“…More recent studies such as Fisher and Hornstein (2000), Khan and Thomas (2007) study inventories in S, s environments. Nonetheless, as mentioned above, the normative aspect of inventories has not been explored in the literature, except in the closed economy model of Lubik and Teo (2009). Our work thus extends the normative analysis of inventories to the case of a small open economy.…”

Section: Introductionmentioning

confidence: 88%

“…1 Nevertheless, despite the large literature on the positive aspects of inventory investment, few studies have investigated the normative aspects of inventory investment. An exception is Lubik and Teo (2009), who study how inventory investment affects the design of optimal monetary policy in a closed economy model. Lubik and Teo (2009) find that optimal monetary policy in a New Keynesian model with inventories deviates from a standard New Keynesian model without inventories as a strict inflation targeting is no longer the optimal policy in a model with inventories.…”

Section: Introductionmentioning

confidence: 99%

“…An exception is Lubik and Teo (2009), who study how inventory investment affects the design of optimal monetary policy in a closed economy model. Lubik and Teo (2009) find that optimal monetary policy in a New Keynesian model with inventories deviates from a standard New Keynesian model without inventories as a strict inflation targeting is no longer the optimal policy in a model with inventories. The purpose of this paper is to extend Lubik and Teo (2009) and investigate how inventory investment affects the design of optimal monetary policy in an open economy model.…”

Section: Introductionmentioning

confidence: 99%

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