Monetary policy and the role of inventory investment
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 an...
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| Format: | Article |
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Taylor and Francis
2017
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| Online Access: | https://eprints.nottingham.ac.uk/44563/ |
| _version_ | 1848796945411211264 |
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| author | Rubio, Margarita Schuh, Scott |
| author_facet | Rubio, Margarita Schuh, Scott |
| author_sort | Rubio, Margarita |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | 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. |
| first_indexed | 2025-11-14T19:56:02Z |
| format | Article |
| id | nottingham-44563 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:56:02Z |
| publishDate | 2017 |
| publisher | Taylor and Francis |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-445632020-05-04T19:00:00Z https://eprints.nottingham.ac.uk/44563/ Monetary policy and the role of inventory investment Rubio, Margarita Schuh, Scott 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. Taylor and Francis 2017-08-09 Article PeerReviewed Rubio, Margarita and Schuh, Scott (2017) Monetary policy and the role of inventory investment. Applied Economics Letters, 24 (21). pp. 1605-1621. ISSN 1466-4291 DSGE sticky prices inventories monetary policy Great Moderation http://www.tandfonline.com/doi/abs/10.1080/13504851.2017.1363855 doi:10.1080/13504851.2017.1363855 doi:10.1080/13504851.2017.1363855 |
| spellingShingle | DSGE sticky prices inventories monetary policy Great Moderation Rubio, Margarita Schuh, Scott Monetary policy and the role of inventory investment |
| title | Monetary policy and the role of inventory investment |
| title_full | Monetary policy and the role of inventory investment |
| title_fullStr | Monetary policy and the role of inventory investment |
| title_full_unstemmed | Monetary policy and the role of inventory investment |
| title_short | Monetary policy and the role of inventory investment |
| title_sort | monetary policy and the role of inventory investment |
| topic | DSGE sticky prices inventories monetary policy Great Moderation |
| url | https://eprints.nottingham.ac.uk/44563/ https://eprints.nottingham.ac.uk/44563/ https://eprints.nottingham.ac.uk/44563/ |