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Why Do Countries and Industries with Large Seasonal Cycles Also Have Large Business Cycles?

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  • J. Joseph Beaulieu
  • Jeffrey K. MacKie-Mason
  • Jeffrey A. Miron

Abstract

We show that there is a strong, positive correlation across countries and industries between the standard deviation of the seasonal component and the standard deviation of the nonseasonal component of aggregate variables. After documenting this stylized fact, we discuss possible explanations and develop a model that generates our empirical finding. The main feature of the model is that firms endogenously choose their degree of technological flexibility as a function of the amounts of seasonal and nonseasonal variation in demand. Although this model is intended to be illustrative, we find evidence supporting one of its key empirical implications.

Suggested Citation

  • J. Joseph Beaulieu & Jeffrey K. MacKie-Mason & Jeffrey A. Miron, 1992. "Why Do Countries and Industries with Large Seasonal Cycles Also Have Large Business Cycles?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 621-656.
    • Handle: RePEc:oup:qjecon:v:107:y:1992:i:2:p:621-656.
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    File URL: http://hdl.handle.net/10.2307/2118484
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