What Drives Inventory Accumulation? News on Rates of Return and Marginal Costs
CHRISTOPH GÖRTZ,
CHRISTOPHER GUNN,
THOMAS A. LUBIK
Abstract:We study the determinants of inventory accumulation in a structural vector autoregression (VAR) framework with news shocks. Specifically, we investigate how news shocks affect two key determinants of inventory movements, namely, rates of return and marginal costs. We establish that inventories react strongly and positively to news about future increases in total factor productivity. We provide evidence that changes in external and internal rates of return are central to the transmission for such news shocks. W… Show more
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