Inventories and real rigidities in New Keynesian business cycle models

Oleksiy Kryvtsov; Virgiliu Midrigan

doi:10.1016/j.jjie.2009.12.004

Inventories and real rigidities in New Keynesian business cycle models

Oleksiy Kryvtsov, Virgiliu Midrigan

Research output: Contribution to journal › Article › peer-review

Abstract

Kryvtsov and Midrigan (2008) study the behavior of inventories in an economy with menu costs, fixed ordering costs and the possibility of stockouts. This paper extends their analysis to a richer setting that is capable of more closely accounting for the dynamics of the US business cycle. We find that the original conclusion survives in this setting: namely, the model requires an elasticity of real marginal cost to output approximately equal to the inverse intertemporal elasticity of substitution in consumption in order to account for the countercyclicality of the aggregate inventory-to-sales ratio in the data.

Original language	English (US)
Pages (from-to)	259-281
Number of pages	23
Journal	Journal of The Japanese and International Economies
Volume	24
Issue number	2
DOIs	https://doi.org/10.1016/j.jjie.2009.12.004
State	Published - Jun 2010

Keywords

Calvo pricing
Inventories
Real rigidities

ASJC Scopus subject areas

Finance
Economics and Econometrics
Political Science and International Relations

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10.1016/j.jjie.2009.12.004

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AB - Kryvtsov and Midrigan (2008) study the behavior of inventories in an economy with menu costs, fixed ordering costs and the possibility of stockouts. This paper extends their analysis to a richer setting that is capable of more closely accounting for the dynamics of the US business cycle. We find that the original conclusion survives in this setting: namely, the model requires an elasticity of real marginal cost to output approximately equal to the inverse intertemporal elasticity of substitution in consumption in order to account for the countercyclicality of the aggregate inventory-to-sales ratio in the data.

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KW - Real rigidities

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Inventories and real rigidities in New Keynesian business cycle models

Abstract

Keywords

ASJC Scopus subject areas

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