Researchers at the New York Fed find evidence that inventory investment amplifies economic fluctuations after a tightening in financial conditions, instead of serving as a buffer. “This analysis suggests that inventory accumulation will be a drag on economic activity this year but provide a boost in 2020,” Richard K. Crump, David O. Lucca and Casey McQuillan write in a post on the bank’s Liberty Street Economics blog. They write that the spread between yields on Baa-rated corporate bonds and 10-year Treasurys widened by about 45 basis points in 2018, implying that this will dampen the contribution of inventories to gross…
