Inventory investment plays a central role in business cycle fluctuations. This post examines whether inventory investment amplifies or dampens economic fluctuations following a tightening in financial conditions. We find evidence supporting an amplification mechanism. This analysis suggests that inventory accumulation will be a drag on economic activity this year but provide a boost in 2020. As detailed in the NIPA Handbook, inventory investment is the change in the stock of inventories held by private businesses. It includes goods ready for sale, those currently in production, as well as materials and supplies. With ... (full story)