9312239 Maccini Inventory fluctuations are an important feature of business cycles. Yet inventory research is in a very unsettled state. This research will focus on two important unsettled issues. One is whether cost shocks in the form of significant price increases of important inputs in the production process together with the need to hold buffer stocks can explain inventory and production movements. Existing work has concentrated on a small set of manufacturing industries and solely on finished goods inventories. This research focuses on examining production to order as well as production to stock and investigates the interaction of order backlogs and inventories. Further, it will examine the interaction of movements in inventories of materials and supplies with those of finished goods. The second issue to be analyzed is how do credit market conditions influence inventory movements. This is critical for understanding how monetary policy affects the economy. The research focuses on whether borrowing constraints brought about by imperfections in the credit markets causes certain firms to have limited access to credit which in turn influences their pattern of inventory holding behavior. A data base for individual firms which combines data on financial condition with that on inventories and sales will also be constructed and used. ***
