What Do Inventories Tell about the Future Economy?

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Authors: Yuanzhen Lyu
Cited by: 0
References: 92

Abstract

ABSTRACT This paper provides evidence that the mean and dispersion of manufacturers’ inventory growth, as reflected in accounting disclosures, convey valuable information about subsequent changes in economic output growth. At the same time, I find that although government statistical agencies and professional forecasters incorporate mean inventory growth in their estimates or forecasts, they fail to account for its dispersion. I develop and calibrate a heterogeneous-firm model to show that the leading information embedded in macro-level inventory moments arises from firms’ asymmetric responses to news shocks at the micro level. The model also suggests that the failure to incorporate dispersion is likely due to the noise in the dispersion signal used by statistical agencies and forecasters. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: E01; E22; E32; E37; M41.

Fields of Study & Subjects

Market Dynamics and Volatility Monetary Policy and Economic Impact Energy Environment Economic Growth

Publication details

Journal / source
The Accounting Review
Publisher
American Accounting Association
Pages
1–31
Publication date
1 September 2026
Language
EN