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

9 Pages Posted: 4 Apr 2011 Last revised: 1 Oct 2022

See all articles by Valerie A. Ramey

Valerie A. Ramey

University of California at San Diego; National Bureau of Economic Research (NBER)

Daniel J. Vine

Board of Governors of the Federal Reserve System

Date Written: August 2004

Abstract

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.

Suggested Citation

Ramey, Valerie A. and Vine, Daniel J., Why Do Real and Nominal Inventory-Sales Ratios Have Different Trends (August 2004). NBER Working Paper No. w10703, Available at SSRN: https://ssrn.com/abstract=1800504

Valerie A. Ramey (Contact Author)

University of California at San Diego ( email )

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Daniel J. Vine

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