Inventories and capacity utilization in general equilibrium /
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| Format: | Thesis eBook |
| Language: | English |
| Published: |
[College Station, Tex.] :
[Texas A&M University],
[2010]
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| Online Access: | Link to OAK Trust copy |
| Abstract: | The primary goal of this dissertation is to gain a better understanding, in the context of a dynamic stochastic general equilibrium framework, of the role of inventories and capacity utilization (of both capital and labor) and, in particular, the relationship among them. These are variables which have long been recognized as playing an important role in the business cycle. An analysis of the association between inventories and capital utilization seems natural, for physical capital could be seen as a stock ultimately destined to be transformed into an inventory of finished goods. In the same way, inventories could be seen as a stock of physical capital already transformed into finished goods. Introducing variable rates of utilization of capacity, then both can be seen as providing a short-run adjustment "buffer stock"mechanism.The analysis of the relationship between those variables is centered on the effects of two possible shocks: preference (demand) shocks and technology shocks. Impulse-response experiments show that inventories and the rate of capital utilization are mostly complements, while inventories and the rate of labor utilization are mostly substitutes. Moreover, low-persistence shocks emphasize the role of inventories asbeing a "shock absorber", whereas high-persistence shocks emphasize the role of inventories as being a complement to consumption. Consistent with the stylized facts in the literature, simulation results show that inventory holdings are pro-cyclical, while the inventory-to-sales ratio is counter-cyclical.Two additional "themes" are explored. The first has to do with the treatment of uncertainty and the consequences of using, as it is done in most of the literature, a first-order approximation. By approximating the decision rules to a second order, we observe that higher exogenous uncertainty enhances the importance of the precautionary motive to holding inventories. The second additional theme is a more general framework for the analysis of capital utilization. We find that the two most common ways of modeling capital utilization can't in a more general specification that incorporates spending on capital maintenance. Though the afore mentioned results do not vary qualitatively after that concept is introduced, quantitative answers do. |
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| Item Description: | "Major Subject: Economics" Title from author supplied metadata (automated record created 2010-03-12 12:08:51). Electronic resource. |
| Physical Description: | 1 online resource. |
| Bibliography: | Includes bibliographical references. |