, the correlation has been negative for the whole sample but has changed sign in the more recent period. For the most part, these correlations have behaved similarly in the filtered data.
These basic stylized facts of inventory behavior provide support for a standard buffer-stockmodel of inventories for Germany and the United States ( Box 1 ) . To the extent that firms hold inventories as a buffer, part of the volatility in sales would not feed into production: higher than anticipated demand would be satisfied by running down inventories. As a result, the
In the United States and a few European countries, inventory behavior is mainly the outcome of demand shocks: a standard buffer-stock model best characterizes these economies. But most European countries are described by a modified buffer-stock model where supply shocks dominate. In contrast to the United States, inventories boost growth with a one-year lag in Europe. Moreover, inventories provide limited information to improve growth forecasts particularly when a modified buffer-stock model characterizes inventory behavior.
Many studies of the demand for money, covering a wide variety of economies, have demonstrated the importance of financial innovations and shifts in monetary policy regimes, but they have also illustrated the difficulty of measuring and assessing such changes. Because innovations and regime shifts have differed markedly across countries, international comparisons can help identify their effects. This paper reviews the literature on money demand comparisons, focusing primarily on industrial countries. It finds that innovations have had widespread effects, but also that the demand for money is not generally less stable now than it was before those changes occurred.
disturbance term of the equilibrium relationship; the equation thus lacks a stable steady state, and real money balances appear not to be cointegrated with the determining variables ( χ ). But even the equations with significant adjustment rates display a very high degree of autoregressivity. Most subsequent studies using partial-adjustment models have confirmed the importance of this problem in most major countries and have uncovered serious instabilities that may result from excessive restriction of the dynamics.
The buffer-stockmodel at first seemed to offer a way out
Jean-Marc Fournier, Takuma Hisanaga, and Anh D. M. Nguyen
This paper assesses Japan’s fiscal stance in the past and the future with a stochastic structural model called the Buffer-Stock Model of the Government. Our retrospective analysis suggests that the fiscal stance in the 1990s and the early 2000s was overall looser than the model recommendations. As for the future, the model advises the near-term fiscal policy to be supportive with a view to narrowing the output gap and minimizing hysteresis, while recommending a fiscal consolidation over the medium-term at a gradual pace.