An Empirical Investigation of Fluctuations in Manufacturing Sales and Inventory within a Sticky-Price Framework

24 Pages Posted: 26 Nov 2012

Date Written: 1999

Abstract

The empirical study undertaken here employs a structural VAR to estimate the dynamic adjustment of manufacturing sales and inventories to both nominal demand and real supply shocks. The analysis suggests that these impulse responses are generally consistent with those of an equilibrium model of inventory behavior with sticky prices. However, fluctuations in sales and the inventory:sales ratio are found to be mainly driven by real disturbances at both short and long horizons. Moreover, at the business cycle frequency, the relatively minor role of monetary shocks in generating real fluctuations tends to hold consistently throughout the sample period considered.

Suggested Citation

Sarte, Pierre-Daniel, An Empirical Investigation of Fluctuations in Manufacturing Sales and Inventory within a Sticky-Price Framework (1999). FRB Richmond Economic Quarterly, vol. 85, no. 3, Summer 1999, pp. 61-84. Available at SSRN: https://ssrn.com/abstract=2129895

Pierre-Daniel Sarte (Contact Author)

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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