Inventory investment and production in Europe during the ‘Great Recession’: Is there a pattern?

The paper examines the nexus between inventory investment and the change in aggregate production during the ‘Great Recession’ of 2008/09 for 29 European countries. A fairly uniform pattern emerges. Inventory investment is positively correlated with changes in production and follows the latter with a time‐lag of two to three quarters. Very few countries (Austria, Greece, Spain and Switzerland) diverge from the typical pattern. This might hint to problems with respect to data quality.