Journal of Political Economy Vol. 99 No. 3 1991
Production Smoothing Evidence from Physical-Product Data
Abstract
We reconsider the paradox that the variance of production often exceeds the variance of shipments, a result that casts doubt on the production smoothing model of inventory behavior. Most studies of production smoothing have analyzed two-digit SIC dollar-value data from Commerce Department surveys. In contrast, this paper examines disaggregated physical-product data and finds that production is smoother than shipments in about two-thirds of the 38 industry or product groupings considered. However, doubts about the model persist; most notably, Euler equation estimates of the model's cost parameters are usually imprecise and often do not have the signs postulated by production smoothing models.
- Volume
- 99
- Issue
- 3
- Pages
- 558-581
- Sources
- bibtex:phds-export.bib