Inventories and real rigidities in New Keynesian business cycle models

Oleksiy Kryvtsov, Virgiliu Midrigan

    Research output: Contribution to journalArticle

    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 languageEnglish (US)
    Pages (from-to)259-281
    Number of pages23
    JournalJournal of the Japanese and International Economies
    Volume24
    Issue number2
    DOIs
    StatePublished - Jun 2010

    Fingerprint

    business cycle
    rigidity
    marginal costs
    costs
    substitution
    sales
    economy
    Business cycle model
    New Keynesian
    Real rigidities
    Elasticity
    Business cycles
    Menu costs
    Real marginal cost
    Intertemporal elasticity of substitution
    Costs
    Stockouts

    Keywords

    • Calvo pricing
    • Inventories
    • Real rigidities

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Finance
    • Political Science and International Relations

    Cite this

    Inventories and real rigidities in New Keynesian business cycle models. / Kryvtsov, Oleksiy; Midrigan, Virgiliu.

    In: Journal of the Japanese and International Economies, Vol. 24, No. 2, 06.2010, p. 259-281.

    Research output: Contribution to journalArticle

    Kryvtsov, Oleksiy ; Midrigan, Virgiliu. / Inventories and real rigidities in New Keynesian business cycle models. In: Journal of the Japanese and International Economies. 2010 ; Vol. 24, No. 2. pp. 259-281.
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