Bayesian estimation of a DSGE model with inventories

Arbeitspapier

This paper introduces inventories in an otherwise standard Dynamic Stochastic General Equilibrium Model (DSGE) of the business cycle. Firms accumulate inventories to facilitate sales, but face a cost of doing so in terms of costly storage of intermediate goods. The paper's main contribution is to present a DSGE model with inventories that is estimated using Bayesian methods. Based on US data we show that accounting for inventory dynamics has a significant impact on parameter estimates and impulse responses. Our analysis also reveals that the contribution of structural shocks to variations in the observable variables changes significantly when we allow for inventories. Moreover, we find that inventories enter the Phillips curve as an additional and significant driving variable of inflation and make the inflation process less backward-looking.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: MAGKS Joint Discussion Paper Series in Economics ; No. 23-2011

Classification and Topics

• Classification: Wirtschaft ; Estimation: General ; Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data) ; Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
• Subject: inventories ; Bayesian estimation ; DSGE model ; business cycles ; Konjunkturtheorie ; Dynamisches Gleichgewicht ; Lagerzyklus ; Bayes-Statistik ; Schätzung ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Foerster, Marcel
• Event: Veröffentlichung
• (who): Philipps-University Marburg, Faculty of Business Administration and Economics
• (where): Marburg
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/56561