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 1 2010

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    Keywords

    • Calvo pricing
    • Inventories
    • Real rigidities

    ASJC Scopus subject areas

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

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