Diehl, Ernst W., "A Multi-Sector Model of Inventory-Production Fluctuations: The Impact of Local Information on Global Performance", 1986

ua435

Inventories of finished goods are added to the static input-output model. This addition allows one to relax the assumption that production can instantaneously track incoming orders. The reformulated input-output model exhibits production-inventory cycles over a wide range of parameter constellations. The model can be used for an extensive dynamic analysis of short-term production-inventory fluctuations in different sectors of the economy. In particular, it can be utilized to understand the extent to which each sector's fluctuations are synchronized and dependent on the fluctuations in the other sectors.The cause for the potentially oscillatory behavior of the model is analyzed. It is shown that the main reason for the oscillations lies in the assumption that the actors in the model do not know why orders are issued. They cannot distinguish whether incoming orders are issued because the recipients want to adjust their inventories or whether they are issued because the recipients have changed their long-term production plans. This result points out that one dimension of a successful stabilization policy might be an improved information policy. It is suggested that an extension of the model could be used to explain the production-inventory fluctuations during business cycles and to achieve a more detailed understanding of the behavior of different sectors during such cycles.

This is the whole item.

Date created
  • 1986
Type
Processing Activity License

ITEM CONTEXT

Part of

23d738ba88f8333bc39725f9cb5bd0b8

Scope and Contents
Part of

a6ba3d432669bb4e7e5d1d631a535030

Scope and Contents
Part of

8be0def879466bb233ec7ae0e7a56898

Scope and Contents
Collection

System Dynamic Society Records

Scope and Contents
Collecting area

Items