Production Smoothing Evidence from Physical-Product Data
Journal of Political Economy
1991
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.
- DOI
- 10.1086/261767
- Volume
- 99 (3)
- Pages
- 558-581
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref