Domestic Good Inventory Investment

Abstract

With MM’s treatment of traded goods now fully described, we return to the scheme laid out in the first section of Chapter 17, and apply it to the domestic good. The formulation for the desired stock of inventories is described in section 19.2, and the dynamics of adjustment to this level in section 19.3. Estimated coefficients are reported in section 19.4. Notation for variables is set out in Table 19.1.1, and for coefficients in the results table, Table 19.4.1. Finally, the steady state is discussed in section 19.5.