What Drives Inventory Accumulation? News on Rates of Return and Marginal Costs
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Gertz, C.
Gunn, C.
Lubik, T.
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Crawford School of Public Policy, The Australian National University
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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.
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Centre for Applied Macroeconomic Analysis Working Papers
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Open Access
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