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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 there is a strong, positive correlation across countries and industries between the standard deviation of the seasonal component and the standard deviation of the non-seasonal component of aggregate variables such as output, labor input, interest rates, and prices. 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 non-seasonal variation in demand. Although this model is intended to be illustrative, we find evidence supporting one of its key empirical implications.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3635.

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Date of creation: Feb 1991
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Publication status: published as Quarterly Journal of Economics, May 1992
Handle: RePEc:nbr:nberwo:3635

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  1. Hyllerberg, S. & Engle, R.F. & Granger, C.W.J. & Yoo, B.S., 1988. "Seasonal Integration And Cointegration," Papers 0-88-2, Pennsylvania State - Department of Economics.
  2. Simon Kuznets, 1933. "Seasonal Variations in Industry and Trade," NBER Books, National Bureau of Economic Research, Inc, number kuzn33-1, October.
  3. J. Bradford DeLong & Lawrence H. Summers, 1988. "How Does Macroeconomic Policy Affect Output?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 433-494.
  4. Robert B. Barsky & Jeffrey A. Miron, 1988. "The Seasonal Cycle and the Business Cycle," NBER Working Papers 2688, National Bureau of Economic Research, Inc.
  5. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Staff Report 102, Federal Reserve Bank of Minneapolis.
  6. Rotemberg, Julio J & Saloner, Garth, 1989. "The Cyclical Behavior of Strategic Inventories," The Quarterly Journal of Economics, MIT Press, vol. 104(1), pages 73-97, February.
  7. Beaulieu, J Joseph & Miron, Jeffrey A, 1992. "A Cross Country Comparison of Seasonal Cycles and Business Cycles," Economic Journal, Royal Economic Society, vol. 102(413), pages 772-88, July.
  8. repec:fth:harver:1418 is not listed on IDEAS
  9. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
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