NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Why Do Real and Nominal Inventory-Sales Ratios Have Different Trends

Valerie A. Ramey, Daniel J. Vine

NBER Working Paper No. 10703
Issued in August 2004
NBER Program(s):   EFG   ME

This note explains the diverging trends between real and nominal aggregate inventory-sales ratios. The combined effect of two features of the data explains the divergence. First, while aggregate sales include both goods and services, inventories include only goods. Second, there has been a strong secular decrease in the relative price of goods. The combination of these two factors causes the real and nominal aggregate inventory-sales ratios to have different trends.

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Document Object Identifier (DOI): 10.3386/w10703

Published: Ramey, Valerie A. and Daniel J. Vine. "Why Do Real And Nominal Inventory-Sales Rations Have Different Trends?," Journal of Money, Credit and Banking, 2004, v36(5,Oct), 959-963.

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