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What Drives Inventory Accumulation? News on Rates of Return and Marginal Costs

39 Pages Posted: 9 Mar 2023

See all articles by Christoph Görtz

Christoph Görtz

University of Birmingham - Department of Economics; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Christopher Gunn

Carleton University - Department of Economics

Thomas Lubik

Federal Reserve Banks - Federal Reserve Bank of Richmond

Multiple version iconThere are 2 versions of this paper

Date Written: September 2022

Abstract

We study the determinants of inventory accumulation in a structural VAR framework with news shocks. Specifically, we investigate how news shocks affect two key determinants of inventory movements, namely rates of return and marginal costs. We establish that inventories react strongly and positively to news about future increases in total factor productivity. We provide evidence that changes in external and internal rates of return are central to the transmission for such news shocks. We do not find evidence for a dominant role of marginal costs.

Keywords: Structural VAR, News Shocks, Inventories, Cost of Capital

JEL Classification: C32, E22, E32, G31

Suggested Citation

Görtz, Christoph and Gunn, Christopher and Lubik, Thomas, What Drives Inventory Accumulation? News on Rates of Return and Marginal Costs (September 2022). Available at SSRN: https://ssrn.com/abstract=4222589 or http://dx.doi.org/10.2139/ssrn.4222589

Christoph Görtz (Contact Author)

University of Birmingham - Department of Economics ( email )

United Kingdom

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )

Christopher Gunn

Carleton University - Department of Economics ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S 5B6
Canada

Thomas Lubik

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

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

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