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Activity Number:
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38
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Type:
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Contributed
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Date/Time:
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Sunday, August 2, 2009 : 2:00 PM to 3:50 PM
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Sponsor:
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Business and Economic Statistics Section
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| Abstract - #303586 |
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Title:
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A Wavelet Analysis of the Role of Volatility in Inventories and Sales Growth in the Great Moderation
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Author(s):
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David J. Doorn*+
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Companies:
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The University of Minnesota-Duluth
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Address:
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Labovitz School of Business and Economics, Duluth, MN, 55812,
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Keywords:
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volatility ; output growth ; wavelet ; inventories ; great moderation
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Abstract:
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Much recent work has documented and sought to explain declining macroeconomic volatility in the U.S. since the mid-1980s, known as The Great Moderation. One popular avenue of research has attempted to link this decline to advances in inventory management. In this paper we make use of wavelet statistical methods to further investigate this link. Using a specialized version of a discrete wavelet transform allows decomposition of the variance of a time series, as well as the covariance between series, on a scale by scale basis. We apply these methods to monthly data on aggregate inventories and sales in the manufacturing sector as well as the durable and nondurable goods subsectors. Initial results support findings of changes in volatility for sales and output growth taking place in the 1980s, but provide little evidence of reduced inventory growth volatilities playing a significant role.
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