This paper presents a model that provides an explanation, based on regime switching in the real interest rate and learning, of why tests based on stock adjustment models, Euler equations, or decision rules—which emphasize short-run fluctuations in inventories and the interest rate—are unlikely to uncover a negative relationship between inventories and the real interest rate. The model, however, predicts that inventories will respond to long-run movements, that is, to regime shifts in the real interest rate. Tests emphasizing cointegration techniques confirm this prediction and show a significant long-run relationship between inventories and the real interest rate.
Maccini, Louis J., Bartholomew J. Moore and Huntley Schaller.
2004."The Interest Rate, Learning, and Inventory Investment."American Economic Review,
94(5): 1303-1327.DOI: 10.1257/0002828043052295