The empirical study undertaken here employs a structural VAR to estimate the dynamic adjustment of manufacturing sales and inventories to both nominal demand and real supply shocks. The analysis suggests that these impulse responses are generally consistent with those of an equilibrium model of...

Staggered nominal price setting introduces predictable sales variations at the firm level. We study the implications of staggered prices in a framework where, because of increasing marginal cost, firms use inventories to smooth production and thereby separate sales from production. Conventional...