Tag: inventory

Financial Constraints on Inventory Investment

Financial Constraints on Inventory Investment

Inventories have been studied by macro-economist for their role in the business cycles (Abramovitz 1950) and their relation with corporate profits (Mitchell 1951, Lucas 1977) and with the volatility of cash flows (Fazzari, Hubbard et al. 1988), both key leading indicators of the state of the economy (Carpenter, Fazzari et al. 1994); other evidence suggests their implications on the general level of the economy in case of financial shocks because of erroneous forecasts (Bernanke and Gertler 1989, Bernanke, Gertler et al. 1996) or their limited efficiency in collateralization (Berk 2014).

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