Inventory policies for non-instantaneous deteriorating items with preservation technology investment under price-sensitive time-dependent demand
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The paper investigates the nexus between inventory investment and the change in aggregate production for 29 European countries over the period 2000-2009. A special interest is taken in the Great Recession of 2008/09. For most countries, a fairly uniform pattern emerges. Inventory investment is positively correlated with changes in production and follows the latter with a time-lag of two to three quarters. Therefore, there is no evidence that inventory investment either drives or smoothes the business cycle. Very few countries - Austria, Greece, Spain, and Switzerland - diverge from the typical pattern. This might hint to problems with respect to data quality.
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The importance of inventory investment in United States cyclical fluctuations is long established. Work by Abramovitz (1950) showed that inventory investment accounted for a large share of the decline in output during pre-war recessions in the U.S., Blinder and Maccini (1991) showed that this pattern continued in the post-war period and concluded that the inventory accelerator created cycles that otherwise might not have existed. There are a number of ways to examine the role of inventory investment in business cycles. These approaches can be distinguished by which component of the business cycle they examine in relation to inventory investment. Employing measures that investigate the role of inventories in different phases of the business cycle can deepen the understanding of the inventory investment business cycle relationship. This thesis measures the role of inventory investment in Australian business cycles in three ways. The first concentrates on the importance of inventory investment in the downturn and recovery phases of the business cycle. The second gives a more rigorous account of the influence of inventory investment in the recovery phase, through investigating the phase structure of the Australian business cycle and the role of inventory investment in this phase structure. The third tests for a multicointegrating relationship between production and sales, linked through inventory investment. Overall, the results suggest that inventory investment has played an important role in Australian cyclical fluctuations. Evidence is presented that inventory investment can explain a three-phase structure to the Australian business cycle. Some evidence is also found of a multicointegrating relationship between production and sales.
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In this paper, we explore how firms can manage their sourcing better by developing relationships not only with their suppliers but also with their suppliers' suppliers. We detail an empirical case study explaining how the firm developed relationships with its suppliers and raw material suppliers via a collaborative center, the sourcing hub. We then analytically model the scenarios encountered in our empirical work, and examine two facets of upstream sourcing under uncertain demand scenarios: (a) firms can supply raw material directly to their suppliers, and this may be beneficial for the firm and its suppliers, (2) firms can bring their suppliers together at the sourcing hub, and the resulting cooperation between suppliers is beneficial for the suppliers and the raw material suppliers. Overall, our work explores the market and economic conditions under which active management of upstream sourcing can add value to supply chains.
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It is well known that fluctuations in inventory investment are a major source of fluctuations in gross national product. This has stimulated numerous empirical studies designed to understand the causes of changes in inventory investment. These studies include those (for example, Michael Lovell) that utilize a flexible accelerator model of inventory behavior as well as those (for example, David Belsley) that utilize the linear decision rule approach to optimal inventory holding. The latter approach, however, can be interpreted in terms of a flexible accelerator model. See J. C. R. Rowley and P. K. Trivedi for a survey of the literature. Recently, several authors (for example, Martin Feldstein and Alan Auerbach) observed that these studies yield very implausible empirical results. The basic difficulty is that the estimates of the speed with which firms close gaps between desired and actual inventory stocks are very low. Often, the estimated speed of adjustment is less than 10 percent per quarter. As Feldstein and Auerbach stress, this is extremely implausible when even the largest swings in inventories in a given quarter amount to less than one day's production. The purpose of this paper is to undertake an analysis of adjustment speeds for finished goods inventory investment. In our empirical work, we utilize a modified flexible accelerator model of inventory investment.1 Like the conventional flexible accelerator, the model permits firms to close a fraction of the gap between desired and actual inventories in any period. The relevant fraction is of course the adjustment coefficient, and it may vary in principle between zero and unity. Our model differs from the conventional model in assuming that the desired stock of finished goods inventories depends on the normal levels of exogenous variables that firms must forecast to make decisions on inventory holdings. These include not only the normal level or orders, or demand, which is a standard explanatory variable in the empirical literature, but also the normal levels of real factor-input prices and real interest rates. In addition, we permit the normal levels to change relatively slowly in response to changes in past levels of orders, real factor-input prices, and real interest rates. Our objective is to investigate whether the slow adjustment speeds that have been estimated in the literature are due to the use of models which contain an incomplete menu of exogenous variables to determine desired inventories and pay inadequate attention to lags in the adjustment of normal levels of exogenous variables.
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This paper analyses the relations of inventory investment and economic cycle from the aspects of macro,industry and micro levels,educes the viewpoint that we can foresee economic wave based on inventory investment.According to China's the reality of the decline of inventory investment,we puts forward some suggestions about paying more attention to inventory investment data,and keeping on taking active macro policies.
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This paper describes the evolution of inventory investment in South Africa over the past two decades, and identifies the factors influencing inventory investment over this period. An econometric model of inventory investment in South Africa, based on the production smoothing approach, is constructed. The results of the model indicate that actual sales, production, unfilled orders, price levels, interest rates and expected sales have an influence on the evolution of inventory investment. These variables are directly or indirectly influenced by macroeconomic policy decisions and through their influence on inventory investment they also influence changes in gross domestic product. Therefore, prior information on the factors that influence inventory investment contributes to explaining changes in gross domestic product and may help to prepare more accurate short-term forecasts of overall economic activity.
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Journal Article The Cyclical Pattern of Inventory Investment Get access Ragnar Nurkse Ragnar Nurkse Columbia University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 66, Issue 3, August 1952, Pages 385–408, https://doi.org/10.2307/1885310 Published: 01 August 1952
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