MOSES ABRAMOVITZ, Stanford University and National Bureau of Economic Research
This paper treats two major aspects of fluctuations in inventory investment: (1) their size, expressed as a percentage of the cyclical changes in gross national product (which we may refer to as the 'share' of inventory investment in fluctuations of gross national product); and (2) the timing of the peaks and troughs of inventory investment cycles compared, first, with those in business cycles and, secondly, with those in the rate of change in output.
A study of comprehensive data on inventory investment for 1919-38 easily establishes the obtrusive fact that the share of inventory investment in the 5 business cycles identified by the National Bureau is large. If we depend on average measures, the indicated share was 23 per cent for expansions, 47 per cent for contractions, and 32 per cent for full business cycles.1 This last figure may be compared with analogous measures for other important categories: the average share of consumer durable goods in full cycles was 15 per cent; of producer durable goods, 19 per cent; and of construction, 8 per cent.
The data strongly suggest also that the share of inventory investment varies inversely with the duration of expansion or contraction. If we omit two short recessions in the mid-'twenties, when annual gross national product did not decline (though inventory investment did), and classify the remaining phases of expansion and contraction by duration, the aver-____________________