Louis J. Maccini

Input and Output Inventories

This paper builds and estimates a new model of firm behavior that includes decisions to order, use and stock input materials in a stage-of-fabrication environment with either gross production or value added technology. The model extends the traditional linear-quadratic model of output (finished goods) inventories by incorporating delivery and usage of input materials plus input inventory investment--features which largely have been ignored in the literature. Stylized facts indicate that input inventories are empirically more important than output inventories, especially in business cycle fluctuations. Firms simultaneously choose input and output inventories; thus, the model exhibits feedback between stocks induced by dynamic stage-of-fabrication linkages. Estimation of inventory decision rules shows the model is reasonably consistent with data in nondurable and durable goods industries. The results reveal inventory stock interaction, convex costs and viability of gross production and value added specifications, industrial differences and input inventory-saving technology.

Measuring Noise in Inventory Models

This paper has two purposes. One is to assess different models of inventory behavior in terms of their ability to well approximate the realized data on inventories. We do this initially for the pure production smoothing model and then for a sequence of generalizations of the model. Our analysis both performs specification tests as well as measures the deviations of the data from each null model, which we refer to as model noise. This involves the introduction of a noise ratio which provides a metric for measuring the magnitude of the noise component of the data. A second purpose is to explore whether observed cost shocks, including in particular carefully measured series on raw materials prices, can be helpful in explaining inventory movements. We find that the basic production level smoothing model of inventories, augmented by buffer stock motives, observed cost shocks, properly measured, and to a lesser extent stockout avoidance motives, appears to well approximate monthly inventory data.

The Interest Rate, Learning, and Inventory Investment

This paper presents a model that provides an explanation, based on regime switching in the real interest rate and learning, of why tests based on stock adjustment models, Euler equations, or decision rules—which emphasize short-run fluctuations in inventories and the interest rate—are unlikely to uncover a negative relationship between inventories and the real interest rate. The model, however, predicts that inventories will respond to long-run movements, that is, to regime shifts in the real interest rate. Tests emphasizing cointegration techniques confirm this prediction and show a significant long-run relationship between inventories and the real interest rate.

The interrelationship between price and output decisions and investment decisions : Microfoundations and aggregate implications

Abstract This paper develops a model of firm behavior in which both price and output decisions and investment decisions are made. The model permits an analysis of the dynamics of inventory and capital accumulation on price and output behavior. There are two main results: (1) Short-run price and output levels will differ from long-run levels as desired stocks of inventory and capital diverge from actual levels. (2) The size of the elasticities of price and output to changes in demand and cost variables depends on the speed with which gaps between desired and actual stocks are closed through investment.

A Model of Inventory and Layoff Behaviour under Uncertainty

This paper develops a model of firm behavior under uncertainty designed to study the interac tion of inventories and layoffs. The model is a blend of a buffer sto ck model of inventory behavior and an implicit contract model of layo ffs. The model creates a distinction between inventory-biased and lay off-biased firms, each of which exhibits inherently different pattern s of response of inventories and temporary layoffs to demand shocks. In addition, the model implies that the inventory-layoff interaction tends to strengthen (weaken) the response of price and the work force to changes in anticipated demand (real interest rates). Copyright 1988 by Royal Economic Society.

An Aggregate Dynamic Model of Short-Run Price and Output Behavior

I. Introduction, 177. — II. The representative firm model, 179. —III. Aggregate model, 185. — IV. Implications of the model, 192.

On the Theory of the Firm Underlying Empirical Models of Aggregate Price Behavior

Recent empirical work on aggregate and industrial price behavior has been conducted within the framework of a static neo-classical theory of price formation.2 The purpose of this paper is to propose a more general theoretical framework for analyzing price behavior. The proposed framework is neo-classical in its basic characteristics, but unlike the recent literature it is based on a dynamic theory of firm behavior in which decisions on price, inventories and the capital stock are integrated. To serve as a basis for comparison with the model developed here, it is useful to state briefly the main propositions of the static neo-classical model. The model presumes that the typical firm behaves as if it were a simple monopolist that faces competitive factor input markets and sets its price so as to maximize current profits. Assuming a log-linear demand function and production function, the model yields the result that the firms long-run optimal price policy in general is

Serial Correlation in Demand, Backlogging and Production Volatility

This paper explores the idea that stockout avoidance motives together with serial correlation in demand and/or the backlogging of excess demand is sufficient to induce firms to behave so that the variance of production exceeds the variance of sales. The authors show that the idea holds under a wide range of circumstances facing firms, including additive as well as multiplicative demand uncertainty, a general form of serial correlation in demand, whether inventory and shortage costs apply, and whether payment occurs at order or delivery. The results greatly enhance the empirical relevance of the idea. Copyright 1996 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Inventories, employment and hours

A technique is disclosed for identifying a missile in flight. This process comprises the steps of: rapidly sampling radiometric detection signals of a source to collect power spectral density (PSD) characteristics that include the sources continuum in PSD space and PSD frequency; and identifying the source as a missile when the continuum in PSD space decreases as PSD frequency increases.

INVENTORIES, FLUCTUATIONS, AND GOODS SECTOR CYCLES

The paper looks at the role of inventories in U.S. cycles and fluctuations. It concentrates on the goods-producing sector and constructs a model that features both input and output inventories. A range of shocks are present in the model, including sales, technology, and inventory cost shocks. It is found that the presence of inventories does not change the average goods sector–cycle characteristics in the United States very much. The model is also used to examine whether new techniques for inventory control might have been an important factor contributing to the decline in the volatility of U.S. GDP growth. It is found that these would have had little impact upon the level of volatility.