Cyclical Behavior of Inventories and Growth Projections Recent Evidence From Europe and the United States
IMF Working Papers, September 1, 2010
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- Cyclical Behavior of Inventories and Growth Projections Recent Evidence From Europe and the United States
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Bibliographic details
- Authors: Willy A Hoffmaister, Jens R Clausen
- Published: September 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455205431.001
Core findings
- In the United States and a few European countries, inventory behavior is mainly the outcome of demand shocks: a standard buffer-stock model best characterizes these economies.
- Most European countries are described by a modified buffer-stock model where supply shocks dominate.
- In contrast to the United States, inventories boost growth with a one-year lag in Europe.
- Inventories provide limited information to improve growth forecasts particularly when a modified buffer-stock model characterizes inventory behavior.
Research scope and approach
- Study type: IMF Working Paper.
- Authors: Willy A Hoffmaister, Jens R Clausen.
- Publication date: September 1, 2010.
- Empirical focus: Comparisons between the United States and European countries on inventory cyclical behavior and implications for growth projections.
- Analytical tools referenced in metadata: Vector autoregression; buffer-stock model; modified buffer-stock model.
Implications for forecasting and analysis
- Forecasting: Inventory dynamics are more informative for growth forecasts in economies where a standard buffer-stock model (demand-shock driven) applies; where a modified buffer-stock model (supply-shock driven) applies, inventories add limited forecasting value.
- Policy relevance: Differing drivers of inventory cycles (demand vs. supply shocks) imply tailored interpretation of inventory signals in macroeconomic monitoring and forecasting across countries.
Subject classifications and keywords
- Subject: Business cycles, Econometric analysis, Economic growth, Economic theory, Employment protection, Labor, Production, Production growth, Supply shocks, Vector autoregression
- Keywords: buffer-stock model, business cycle, Business cycles, Employment protection, Europe, forecasting, foresight inventory model, Inventories, inventories stem, inventory behavior, inventory change, inventory investment, Production growth, stock, stylized fact, Supply shocks, Vector autoregression, WP