NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Measuring Noise in Inventory Models

Steven N. Durlauf, Louis J. Maccini

NBER Working Paper No. 4487
Issued in October 1993
NBER Program(s):   EFG

This paper has two purposes. One is to assess different models of inventory behavior in terms of their ability to well approximate the realized data on inventories. We do this initially for the pure production smoothing model and then for a sequence of generalizations of the model. Our analysis both performs specification tests as well as measures the deviations of the data from each null model, which we refer to as model noise. This involves the introduction of a noise ratio which provides a metric for measuring the magnitude of the noise component of the data. A second purpose is to explore whether observed cost shocks, including in particular carefully measured series on raw materials prices, can be helpful in explaining inventory movements. We find that the basic production level smoothing model of inventories, augmented by buffer stock motives, observed cost shocks, properly measured, and to a lesser extent stockout avoidance motives, appears to well approximate monthly inventory data.

download in pdf format
   (2099 K)

download in djvu format
   (228 K)

email paper

This paper is available as PDF (2099 K) or DjVu (228 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4487

Published: Journal of Monetary Economics, Vol. 36, no. 1 (1995): 65-89.

Users who downloaded this paper also downloaded these:
West t0143 Inventory Models
Blanchard w0891 The Production and Inventory Behavior of the American Automobile Industry
Durlauf and Hall w2936 Bounds on the Variances of Specification Errors in Models with Expectations
Blinder and Maccini w3408 The Resurgence of Inventory Research: What Have We Learned?
West w1581 A Variance Bounds Test of the Linear Quardractic Inventory Model
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us