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has been cited by the following article:

• TITLE: Inventories, Interest Rates, and Markups

  AUTHORS: David G. Bivin

  KEYWORDS: Inventories, Interest Rates

  JOURNAL NAME: Theoretical Economics Letters, Vol.1 No.2, August 16, 2011

  ABSTRACT: This note explains why inventories might rise with interest rates. Higher real interest rates not only increase the carrying cost of inventories they also reduce the present value of the markup on delayed sales. When the markup is large enough, it is profitable to increase stocks in order to avoid sales delays. Another possibility is that the firm has an incentive to smooth its total stocks so that an increase in the real interest rate causes finished goods to fall but the reduction is partially offset by an increase in raw materials.