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Purchased-Materials Inventories and Inventory Investment

  • Economics


Purchased-Materials Inventories and Inventory Investment This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Postwar Cycles in Manufacturers' Inventories Volume Author/Editor: Thomas M. Stanback, Jr. Volume Publisher: NBER Volume ISBN: 0-870-14094-9 Volume URL: Publication Date: 1962 Chapter Title: Purchased-Materials Inventories and Inventory Investment Chapter Author: Thomas M. Stanback, Jr. Chapter URL: Chapter pages in book: (p. 27 - 60) 4 Purchased-Materials Inventories and Inventory Investment Abramovitz began his investigation of purchased-materials be- havior by adopting a preliminary hypothesis that "stocks of raw materials generally grow and decline with manufacturing activity." L Although he recognized that movements in prices may play a role, this hypothesis provided the principal basis for his inquiry. Pur- chased materials were seen to move in response to changing levels of output, but with delays occasioned. principally by lack of immediate availability of the materials in question. The analysis based., upon this hypothesis consisted principally of estimating the length of the average period of delay in securing materials. This estimate was based on a special study made during the preparation of the 1929 Census of Manufacturers, which classified materials used by manu- facturers according to their origins.2 On the basis of this study Abramovitz concluded that "most raw . materials stocks held by manufacturers are likely to vary positively with a short lag" and that total manufacturers' stocks of purchased materials might be expected to conform closely to business cycles, "lagging 3 months or somewhat more at turning points." Moreover, movements., in purchased-materials inventory investment were expected to be a lagged reflection of movements in the rate of change in output. Evidence at hand did not permit him to e

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