INTERRELATED DEMANDS FOR BUFFER STOCKS AND PRODUCTIVE INPUTS - ESTIMATES FOR 2-DIGIT MANUFACTURING-INDUSTRIES

Empirical estimates of interrelated factor demand equations for inventories, labor inputs, capital stocks, and unfilled orders in selected two-digit industries are provided. This framework is more comprehensive than previous research as it disaggregates inventories by stage of fabrication, it accounts for production-to-stock and production-to-order, and it disaggregates capital and labor inputs. All estimated decision rules display stock-adjustment effects but there are asymmetries in the parameter estimates that are puzzling. There is evidence that factor input prices have a role in explaining stock levels but own-factor price effects are largely absent. Evidence is uncovered that stocks are sensitive to expectation errors attached to output demand. -Author