Heterodox
If we look at standard macro Dynamic Stochastic General Equilibrium models, inventories do not appear. The modelling focus is on expectation formation – particularly in the household sector – and business sector behavior is stylised. Since the assumption is that products are bought and sold both spot and forward in an optimal fashion, production decisions are just set to give exactly the output needed in the spot market.... This assumes a "just-in-time" supply chain, which is an ideal that...
Read More »