نقش موجودی و بهره برداری ظرفیت به عنوان کمک
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|20831||2014||16 صفحه PDF||سفارش دهید||12341 کلمه|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Review of Economic Dynamics, Volume 17, Issue 1, January 2014, Pages 70–85
We examine the role of inventories and capacity utilization (of both capital and labor) for the propagation of business cycle fluctuations. We document a new set of facts regarding the U.S. cyclical regularities of inventories and capacity utilization. First, we find that capital utilization and the flows of services from both capital and labor are procyclical, and comove with the holdings of inventories. Second, we find that labor utilization is procyclical as well, but is weakly negatively correlated with inventories. We build a model that accounts for these facts, and also accounts for the stylized inventory facts, i.e., inventory holdings are procyclical, while the inventory-to-sales ratio is countercyclical. The analysis is centered on the effects of two possible shocks: preference (demand) shocks and technology shocks. Our model shows that inventories and the rate of capital utilization are mostly complements, while inventories and the rate of labor utilization are mostly substitutes. It further shows that temporary demand shocks emphasize the role of inventories as being a “shock absorber,” whereas high-persistence demand shocks, as well as technology shocks of any persistence, emphasize the role of inventories as being a complement to consumption.
The primary goal of this paper is to analyze the role of inventories and capacity utilization – the intensity of use of both capital and labor – in the transmission of business cycle fluctuations. We study the relationship between these variables and whether they respond symmetrically to supply and demand shocks of different rates of persistence. Stylized facts on inventory cycles show that, at the aggregate level, output is more variable than sales, and thus inventory investment is procyclical, while the inventory-to-sales ratio turns out to be countercyclical. We show that capital utilization and the flows of services from both capital and labor are procyclical and comove with the holdings of inventories. Further, we find that labor utilization is procyclical as well, but is weakly negatively associated with inventory holdings. We finally observe that the cyclical components of both the stock of inventories and inventory investment are positively correlated with consumption expenditures. Our model is able to replicate these facts and further provide novel explanations, as it examines both roles of inventories in the business cycle: as shock absorbers and as complements to consumption. We find that temporary demand shocks result in a negative correlation between inventories and both rates of capacity utilization, so that they behave as substitutes. Temporary shocks to technology, in contrast, make inventories complement the utilization of both factors of production. Finally, high-persistence shocks either to preferences or technology make inventories complement capital utilization but substitute labor utilization. Our contributions are important for the following reasons. Empirically, it has long been recognized that inventory fluctuations play an important role in the business cycle. Although inventory investment has averaged roughly one-half of 1 percent of U.S.ʼ GDP over the post-World War II period, changes in inventory investment have averaged more than one-third the changes in quarterly GDP, while the drop in inventory investment accounted for more than 80% of the drop in total output during the average postwar recession period in the U.S.2 Blinder suggests that “business cycles are, to a surprisingly large degree, inventory cycles.” (Blinder, 1990, p. 8). Moreover, the literature is still debating the role of inventories for the propagation of business cycle fluctuations.3 Hence, understanding the dynamics of inventories is key to understanding business cycles. Capacity utilization, being a central component of the economyʼs supply side, is also recognized as having an important role in the business cycle. For instance, variable factor utilization is thought to account for much of the variation in the Solow residual (40–60 percent according to Basu and Kimball, 1997), and thus provides an important insight in characterizing the state of real activity. At a theoretical level, an analysis of the association between inventories and capacity utilization seems natural, since physical capital can be seen as a stock ultimately destined to be transformed into an inventory of finished goods. Likewise, inventories could be seen as a stock of physical capital already transformed into finished goods. Moreover, once we introduce the possibility of variable rates of utilization of both capital and labor, then such rates of utilization and inventories can be seen as providing a short-run adjustment “buffer stock” mechanism. Our paper, therefore, contributes to the existing literature by providing a theoretical intuition of how these components relate to each other and, as a result, affect the transmission of business cycles. Most of the previous related research has either examined partial-equilibrium settings; for example, Galeotti et al. (2005) integrate inventories and labor decisions, distinguishing between employment, hours and effort in a partial-equilibrium model; or have focused on the effects of inventory shocks as drivers of business cycles; for instance, Iacoviello et al. (2011) introduce inventories into a general-equilibrium model with variable capital utilization, to examine the propagation mechanisms of each one of input and output inventories. The new set of business cycle facts that we document show, essentially, that inventories are highly (and positively) associated to the flows of services of both factors of production, but less related to their rates of utilization – indeed, inventories appear to be negatively related to the rate of labor utilization. What we learn from our theory is that the association between inventory holdings and factor services emphasizes their complementarity mechanism, while the association between inventory holdings and the rates of capacity utilization emphasizes their short-run adjustment buffer-stock mechanism. Our findings provide additional insights to the understanding of the business cycle transmission mechanism. Finally, our paper also contributes to the discussion on how aggregate labor supply responds over the business cycle (see, e.g., Ljungqvist and Sargent, 2011). Aggregate shocks, in particular demand shocks, are not only ‘buffered’ by fluctuations in average hours (and changes in the intensity of use of capital) but also by fluctuations in inventory stocks. Introducing inventory investment and variable capacity utilization together into a standard macroeconomic model allows us to identify the short-run substitutability that exists between inventories and hours worked. This provides an additional explanation to reconcile the relative lack of variability of average hours worked seen in the data. We develop a dynamic, stochastic general equilibrium (DSGE) model that distinguishes from earlier models in that it introduces (i) endogenous capital depreciation, (ii) variable use of the labor force, (iii) adjustment costs in physical capital, and (iv) inventory holdings. Endogenous capital depreciation captures the idea that the depreciation rate is a variable subject to choice by the user of the capital good. As such, this rate enters into the model as a function of the intensity of use of capital – see, e.g., the works of Greenwood et al. (1988), and of Rumbos and Auernheimer (2001). Variable labor utilization, which can also be interpreted as variable effort, is introduced into the model by allowing the agent to modify the working time during the production process. Investment adjustment costs are introduced as in Christiano et al. (2005). The demand for inventories, which are zero-return assets, is motivated by the idea that a larger stock allows consumers either to match their tastes more effectively or to economize on shopping costs. As in Kahn et al. (2002) and Iacoviello et al. (2011), we assume that inventories enter the consumersʼ utility function. This specification is equivalent to one in which inventories enter instead in the budget constraint reducing shopping time costs.4 Other approaches for generating a demand for inventory holdings introduce inventories as inputs in the production function (e.g., Kydland and Prescott, 1982) or emphasize the timing of deliveries rather than the timing of production, such as the (S,s)(S,s) specifications of Caballero and Engel (1999), Fisher and Hornstein (2000) and Khan and Thomas (2007b).5 We are aware that the shortcut of introducing inventories in the utility function makes the model lack of a deeper, microfounded demand for inventories. However, by doing so we obtain, as a first step in the literature, a general-equilibrium model that allows us to find an easily interpretable relationship between inventories and capacity utilization, both in the long run and during the business cycle. The only sources of uncertainty in the model are preference (demand) and technology shocks, that make inventories useful beyond their role in the utility function. This motivation is related to Kahn (1987)ʼs “stock-out avoidance” idea, for our agent will also shield herself from the uncertainty associated to the disentanglement between production decisions and shocks realizations.6 The nature of the shocks will emphasize either the crowding-out attribute of the shock-absorbing mechanism of inventories (especially demand shocks) or the consumption-complementarity mechanism of inventories (especially supply shocks). The paper proceeds as follows. The next section introduces our model. We describe the environment and discuss the assumptions. In Section 3, we proceed with the solution to the model, show the main results, and examine in detail the source of uncertainty and persistence behind these results. Finally, Section 4 presents the conclusion to this work.
نتیجه گیری انگلیسی
The primary goal of this work is to gain a better understanding of the role of inventories and capacity utilization (of both capital and labor) in the propagation of business cycles and, in particular, the relationship among them. These are variables which have long been recognized as playing an important role, and having rather well defined associations both among each other and with other indicators in the business cycle. Understanding these relationships is important also theoretically because inventories are in some way an alternative form of capital, and capital, as well, is somehow a form of inventory. Once the possibility of variable rates of utilization of the capital stock is considered, then both such rate of utilization and inventories can be seen as providing a short-run adjustment “buffer stock” mechanism. We also introduce variable utilization of labor in a manner that is very much symmetric to the utilization of capital – the symmetry not being perfect, since changes in the intensity of use of capital affect a stock, while the same is not true of changes in labor utilization. The analysis is centered on the effects of two possible shocks: preference (demand) shocks and technology shocks. By considering the effects of the two shocks simultaneously, where both have the baseline, calibrated parameters, we find that inventories are associated positively with capital utilization, but negatively with labor utilization, in accordance with the data. Furthermore, inventory holdings are procyclical, while the inventory-to-sales ratio is countercyclical, also consistent with the stylized facts. The impulse–response analysis shows that for the calibrated persistence of a shock to technology, inventories behave as being a complement to capital utilization (i.e., they are positively associated), but as substitute to labor utilization – the latter resulting from both the lack of persistence of such rate and from the fact that increasing labor utilization increases the marginal product of capital (and hence the opportunity cost of holding inventories). Still, inventories are positively associated with labor services. For purely temporary technology shocks, inventories act as a complement to both capital and labor utilization rates. A high-persistence demand shock, as in the case of a productivity shock, shows inventories as being a complement to capital utilization, but a substitute to labor utilization. Still, and as in the case of the technology shock, inventories are associated positively with labor services. For non-persistent demand shocks, inventories behave as a substitute for both rates of capacity utilization. These findings warrant some further considerations. Notice, first, that inventories and the rate of capital utilization are mostly complements, while inventories and the rate of utilization of labor are mostly substitutes. It is worth remembering, though, that both rates of utilization complement each other in response to any shocks of any persistence. We can infer that both rates of utilization associate differently with inventories because, as “shock absorbers”, both inventories and the rate of labor utilization result in less of an effect carried on to subsequent periods than changes in the rate of capital utilization and the depreciation rate. In other words, differences in the internal persistence of inventories and the rates of capacity utilization are central for understanding these results. Second, and related to the first remark, notice that purely temporary shocks generate clearer results, in the sense that inventories complement both rates of utilization in response to technology shocks, while they substitute both rates in response to demand shocks (as we would expect, according to the conventional view of inventories). High-persistence shocks, on the other hand, emphasize mostly the role of inventories as being a complement to consumption instead of emphasizing their role as a “shock absorber”. Finally, we have discussed the role of investment adjustment costs on the dynamics of inventories. Overall, we find that the volatility and procyclicality of inventory investment increase with such costs, and consequently the role of inventories in propagating business cycle fluctuations. In the absence of investment adjustment costs, inventory holdings, for example, would result negatively correlated with both output and the rate of capital utilization, clearly at odds with the evidence.