Article ID Journal Published Year Pages File Type
965301 Journal of Macroeconomics 2015 19 Pages PDF
Abstract
We study how producers of capital goods set shipments in response to fluctuations in new orders. We find that shipments respond more to orders when new orders fall below a certain level relative to shipments, usually after orders plunge in recessions. This cyclical change in producers' behavior accounts for a considerable portion of the downturn in equipment investment in the 2001 and 2008-9 recessions. A simple model of production to order suggests that heightened persistence in new orders growth may explain the greater responsiveness of shipments, as may increases in the producers' target delivery lag.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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