Working Paper: NBER ID: w10703
Authors: Valerie A. Ramey; Daniel J. Vine
Abstract: This note explains the diverging trends between real and nominal aggregate inventory-sales ratios. The combined effect of two features of the data explains the divergence. First, while aggregate sales include both goods and services, inventories include only goods. Second, there has been a strong secular decrease in the relative price of goods. The combination of these two factors causes the real and nominal aggregate inventory-sales ratios to have different trends.
Keywords: No keywords provided
JEL Codes: E220
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inclusion of services in the denominator of the inventory-sales ratio (L81) | downward trend of nominal inventory-sales ratio (L81) |
| strong secular decrease in the relative price of goods and structures (L16) | downward trend of nominal inventory-sales ratio (L81) |
| strong secular decrease in the relative price of goods and structures (L16) | stable real inventory-sales ratio (C69) |
| inclusion of services in the denominator of the inventory-sales ratio (L81) | stable real inventory-sales ratio (C69) |