The Rational Expectations Equilibrium Inventory Model

1. Front Matter

   Pages I-XI

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2. The Linear Rational Expectations Equilibrium Inventory Model: An Introduction

   • Tryphon Kollintzas

   Pages 1-32

3. Inventories and Price Fluctuations under Perfect Competition and Monopol

   • S. Rao Aiyagari, Zvi Eckstein, Martin Eichenbaum

   Pages 34-68

4. Temporal Aggregation and the Stock Adjustment Model of Inventories

   • Lawrence J. Christiano, Martin Eichenbaum

   Pages 70-108

5. A Linear Rational Expectations Equilibrium Model of the American Petroleum Industry

   • Sophia P. Dimelis, Tryphon Kollintzas

   Pages 110-197

6. Seasonality, Cost Shocks, and the Production Smoothing Model of Inventories

   • Jeffrey A. Miron, Stephen P. Zeldes

   Pages 199-244

7. Order Backlogs and Production Smoothing

   • Kenneth D. West

   Pages 246-269

8. Back Matter

   Pages 270-271

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This volume consists of six essays that develop and/or apply "rational expectations equilibrium inventory models" to study the time series behavior of production, sales, prices, and inventories at the industry level. By "rational expectations equilibrium inventory model" I mean the extension of the inventory model of Holt, Modigliani, Muth, and Simon (1960) to account for: (i) discounting, (ii) infinite horizon planning, (iii) observed and unobserved by the "econometrician" stochastic shocks in the production, factor adjustment, storage, and backorders management processes of firms, as well as in the demand they face for their products; and (iv) rational expectations. As is well known according to the Holt et al. model firms hold inventories in order to: (a) smooth production, (b) smooth production changes, and (c) avoid stockouts. Following the work of Zabel (1972), Maccini (1976), Reagan (1982), and Reagan and Weitzman (1982), Blinder (1982) laid the foundations of the rational expectations equilibrium inventory model. To the three reasons for holding inventories in the model of Holt et al. was added (d) optimal pricing. Moreover, the popular "accelerator" or "partial adjustment" inventory behavior equation of Lovell (1961) received its microfoundations and thus overcame the "Lucas critique of econometric modelling.

• business cycle
• econometrics
• economics
• equilibrium
• industrial organization
• organizations

• Department of Economics, University of Pittsburgh, Pittsburgh, USA

  Tryphon Kollintzas

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