MARGARITA RUBIO Margarita.Rubio@nottingham.ac.uk
Associate Professor
Monetary policy and the role of inventory investment
Rubio, Margarita; Schuh, Scott
Authors
Scott Schuh
Abstract
In this paper, we develop a dynamic stochastic general equilibrium model (DSGE) with sticky prices and inventory investment to explore the relationship between inventories and monetary policy. We use the traditional inventory literature as a basis to motivate this extension of the benchmark model and propose inventories as a factor of production. Within this setting, we test the empirical results in Irvine and Schuh (2005), who find that, since the mid-80s, monetary policy changed its target towards the inventory component of GDP. We explore this idea in our theoretical model and conclude through simulations that this is a plausible complementary explanation for the reduction in output volatility that was observed during the Great Moderation period.
Journal Article Type | Article |
---|---|
Acceptance Date | Aug 1, 2017 |
Online Publication Date | Aug 9, 2017 |
Deposit Date | Aug 2, 2017 |
Publicly Available Date | Feb 10, 2019 |
Journal | Applied Economics Letters |
Print ISSN | 1350-4851 |
Electronic ISSN | 1466-4291 |
Publisher | Routledge |
Peer Reviewed | Peer Reviewed |
Volume | 24 |
Issue | 21 |
DOI | https://doi.org/10.1080/13504851.2017.1363855 |
Keywords | DSGE, sticky prices, inventories, monetary policy, Great Moderation |
Public URL | https://nottingham-repository.worktribe.com/output/877359 |
Publisher URL | http://www.tandfonline.com/doi/abs/10.1080/13504851.2017.1363855 |
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