Applied econometric research has been troubled by the fact that estimated adjustment speeds from stock-adjustment models of inventory investment turn out to be "implausibly slow." The paper presents new empirical evidence using business-survey data collected by the IFO Institute Munich, Germany....

The present paper examines the role of inventories for the short run adjustment behavior of firms. A theoretical model of a monopolistic firm carrying inventories that includes costs of adjusting output is examined. The model is tested empirically by using business survey data collected by the...