Inventory Investment, Business Cycles and Financial Constraints - Evidence from the Bank of Israel's Companies Survey

12/11/2006 |  Ribon Sigal
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Inventory Investment, Business Cycles and Financial Constraints - Evidence from the Bank of Israel's Companies Survey
Sigal Ribon
Abstract
The paper investigates industrial firms' investment in raw material and final goods inventories in the years 1991 to 2005, using qualitative data from the Bank of Israel's Companies Survey. The results are generally consistent with the "production smoothing - buffer stock" model, presented in Blinder (1981). The results also support the view that the firm's financial constraints affect its investment in inventories.
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