The Roles of Inventories Investigated in a Factor Demand Model
Revue Economique, Vol. 49, No. 5, pp. 1345-1364, 1998
21 Pages Posted: 12 Jun 2011
Date Written: February 9, 1998
Abstract
An ECM is derived from first order conditions of a factor demand model. The role of inventory stock in the long run, i.e. a precautionary measure (according to Holt, Modigliani, Muth and Simon (1960)), and/or the role as a production factor (Kydland and Prescott (1982), Christiano (1988)) are investigated. French data from five industrial sectors (1970.I-1992.IV) are used for the analyses. The results indicate that neither the role as a precautionary measure nor the role of a production factor is rejected.
Keywords: factor demand, inventories, production factor
JEL Classification: C32, D21, D24
Suggested Citation: Suggested Citation