Inventory Investment in ‘Commodity’ Exports
The notation in this section is generic; it is made specific in its applications below to inventory investment in the exportable ‘commodity’ (whose production level is XC), and later in Chapter 19 to inventory investment in the domestic good (whose output is YD). For current purposes, define (17.1.1a) S = stock oj inventories at the end oj the current quarter; (17.1.1b) FS = flow of inventories during the current quarter; where FS>0 implies a build up, and FS<0 a run down. Under the assumption that physical depreciation/deterioration is negligible, the identity linking inventory investment FS to stocks is (17.1.2) FS(t) + S(t - 1) = S(t), where S(t) is the outgoing stock at the end of quarter t, and FS(t) is the flow during that quarter.
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