Firm-level Inventory Dynamics in Korea: A Production-augmented (S, s) Inventory Model*

Sangwon Suh, Bong Geul Chun, Byung Jae Choi

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


In this paper, we extend the conventional (S, s) model by incorporating a production process. This extension allows us to analyze not only retailers' but also manufacturers' inventories. Simulation exercises show that our model can generate stylized facts about inventory behaviors. We use the inventory model to estimate firm-level inventory dynamics in Korea. The estimation results suggest that the predictions implied by our inventory model are largely consistent with the data. The expected demand for finished goods turns out to be the most important factor contributing to inventory variations at the individual firm level. At the aggregate level, however, heterogeneity across firms also matters.

Original languageEnglish
Pages (from-to)417-449
Number of pages33
JournalAsian Economic Journal
Issue number4
StatePublished - Dec 2018


  • (S
  • business cycle
  • inventory investments
  • s) model


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