Blackwell Reference Online

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After a period of dormancy in the 1960s and 1970s, empirical work on inventories has enjoyed a resurgence in the 1980s and 1990s. In this chapter, I discuss some of the econometric issues raised by this recent work, and survey results from some recent empirical papers. For reasons of comparative advantage, and to avoid overlap with other chapters in this volume, I focus on a rational expectations version of the linear quadratic inventory model of Holt et al. (1960) . My aim is to illustrate recent developments in time series econometrics by showing how such developments have or might be applied to this often used inventory model. Some of these developments, such as the optimal linear combination of a given vector of instruments in the presence of serial correlation, are relatively well known, and appear in standard regression packages such as RATS. Others are not as well known, and, as far as I know, do not appear in standard software packages. The intended reader is one who nonetheless is willing to consider use of these techniques, but finds it difficult or tedious to plow through theoretical papers. From a theoretical econometric point of view, the discussion is informal; the interested reader may consult the cited references for discussion of underlying technical considerations. Because of space constraints, the discussion is by no means self-contained, in that some issues ... log in or subscribe to read full text