Has Inventory Volatility Returned? A Look at the Current Cycle

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Current Issues in Economics and Finance

Has Inventory Volatility Returned? A Look at the Current Cycle

May 2002 Volume 8, Number 5

JEL classification: E22, E32. E37

Authors: James A. Kahn and Margaret M. McConnell

The massive liquidation of inventories during the 2001 recession contrasts sharply with the more moderate inventory movements observed in recent decades. While the rundown might be seen as evidence that firms are not managing their inventories as effectively as some economists have claimed, a careful analysis of inventory behavior in 2001 suggests that during much of the recession, firms were successfully regulating their inventories to avoid a large buildup of excess stock.

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6 pages / 73 kb

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