The influence of inventories on output and prices: A stage of fabrication approach

This paper estimates models of output, price and total inventory in various manufacturing sectors that allow inventories at different stages of fabrication to exert independent influences. The hypothesis tests generally reject the hypotheses that inventories are irrelevant or can be aggregated across stages of fabrication in the output and price models. The hypothesis that raw materials and work-in-process are irrelevant is rejected in about half of the output and price model. In two-thirds of the industries, inventory behavior is independent of the composition of stocks inherited from the previous period.