The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Inventory Cycles

  • Michael C. Lovell
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1114

Abstract

Although inventory investment is a relatively small component of total GNP, even in boom years, the swing from inventory accumulation to massive liquidation is a fundamental factor in the propagation of cyclical reversals in the pace of economic activity. To illustrate, the 1981–2 decline in United States GNP of $31.8 billion dollars deserves to be called an inventory recession because the shift from positive inventory accumulation of $8.9 billion (1972 dollars) at the cycle peak to liquidation of stocks at an annual rate of $22.7, a decline in effective demand of $31.6 billion, greatly exceeded the collapse of any other component of real GNP.

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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Michael C. Lovell
    • 1
  1. 1.