Abstract
The volatility of real GDP growth declined substantially from the mid-1980s to 2007. This paper uses a sample of just-in-time (JIT) adopters to directly test one of the main competing explanations for this phenomenon: the implementation of JIT inventory management. Exploiting the panel nature of the data and using difference-in-differences (DID) estimation, I find no support for the hypothesis that JIT plays a role in reducing output-growth volatility. Instead, my analysis suggests that JIT tends to destabilize real output by increasing the variabilities of inventory and sales growth.
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