Abstract
With MM’s treatment of traded goods now fully described, we return to the scheme laid out in the first section of Chapter 17, and apply it to the domestic good. The formulation for the desired stock of inventories is described in section 19.2, and the dynamics of adjustment to this level in section 19.3. Estimated coefficients are reported in section 19.4. Notation for variables is set out in Table 19.1.1, and for coefficients in the results table, Table 19.4.1. Finally, the steady state is discussed in section 19.5.
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Keep in mind that this stock-building equation constitutes a demand source for MM’s shortest (Keynesian) run (of one quarter) in which YD is not constrained by a production function. It is possible that a surplus supply of imported intermediate goods (which are the only type of imports formally recognized in MM) would have some stimulatory effect on production of the domestic good (leading to an increase in inventories of it).
Murphy (1992a), p. II—36 (04/05/92).
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© 1995 Springer-Verlag Berlin Heidelberg
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Powell, A.A., Murphy, C.W. (1995). Domestic Good Inventory Investment. In: Inside a Modern Macroeconometric Model. Lecture Notes in Economics and Mathematical Systems, vol 428. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-00771-6_19
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DOI: https://doi.org/10.1007/978-3-662-00771-6_19
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-60027-5
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