Research

A large part of manufacturing has sizable backlog of unfilled orders. This paper explores several implications of order backlog. First, backlog leads to time to fill, the time wedge between order arrival and fulfillment. Using a novel administrative micro dataset on order books in Germany, we document that time to fill is half a year on average and features a pronounced right tail across establishments. Second, backlog makes deflation challenging. We propose a theoretically coherent deflation scheme that avoids high informational requirements. Third, quantity and price of sales are predetermined by quantity and price of new orders. Fourth, the rigidity of sales prices invalidates conventional strategies to identify demand and supply shocks. Instead, variation in quantity and price of new orders can identify such shocks. Fifth, backlog constitutes an adjustment margin to shocks, which we analyze theoretically and for which we provide empirical evidence.

Transportation restrictions on waterways due to high or low water level events lead to disruptions of supply chains, which are exogenous to the current state of the economy. This paper proposes a novel method to exploit and quantify these surprising transportation restrictions which lead to regional supply chain disruptions and applies the method to the river Rhine. A surprising decrease of the Rhine’s shipping capacity leads to a short-lived but significant decrease in economic activity, not only in the bordering federal states but entire Germany. This effect is more pronounced in industries and regions that rely more heavily on the Rhine and the goods shipped on it. One channel through which these disruptions propagate are changes in energy prices. We find that energy marketplaces that are dependent on Rhine transportation show a price increase while others do no react. Also, we document a substitution towards suppliers that do not rely on the Rhine to deliver their goods.

Work in progress.