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Seasonal Cycles, Business Cycles, and the Comovement of Inventory Investment and Output

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  • Carpenter, Robert E
  • Levy, Daniel

Abstract

The importance of inventory investment in the business cycle is well-known. Its role in the seasonal cycle is less well known. The authors examine the variation of inventory investment and its comovement with output over the seasonal and business cycles. They measure the deterministic and stochastic seasonal components of monthly inventory data and find seasonality contributes about 75 percent of the total variance, similar to the proportion found in GDP. The authors find that inventory investment and output exhibit high correlation, with similar magnitudes, at seasonal and business cycle frequencies. These findings are consistent with the idea that seasonal cycles and business cycles are propagated through similar mechanisms and suggest that inventory investment may play as important a role in the seasonal cycle as it does in the business cycle.

Suggested Citation

  • Carpenter, Robert E & Levy, Daniel, 1998. "Seasonal Cycles, Business Cycles, and the Comovement of Inventory Investment and Output," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 331-346, August.
  • Handle: RePEc:mcb:jmoncb:v:30:y:1998:i:3:p:331-46
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    Citations

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    Cited by:

    1. Matas-Mir, Antonio & Osborn, Denise R., 2004. "Does seasonality change over the business cycle? An investigation using monthly industrial production series," European Economic Review, Elsevier, vol. 48(6), pages 1309-1332, December.
    2. Daniel Levy & Haipeng (Allan) Chen & Georg Müller & Shantanu Dutta & Mark Bergen, 2010. "Holiday Price Rigidity and Cost of Price Adjustment," Economica, London School of Economics and Political Science, vol. 77(305), pages 172-198, January.
    3. Dick van Dijk 1 & Birgit Strikholm & Timo Teräsvirta, 2003. "The effects of institutional and technological change and business cycle fluctuations on seasonal patterns in quarterly industrial production series," Econometrics Journal, Royal Economic Society, vol. 6(1), pages 79-98, June.
    4. Levy, Daniel & Dezhbakhsh, Hashem, 2003. "International evidence on output fluctuation and shock persistence," Journal of Monetary Economics, Elsevier, vol. 50(7), pages 1499-1530, October.
    5. Humphreys, Brad R., 2001. "The behavior of manufacturers inventories: Evidence from US industry level data," International Journal of Production Economics, Elsevier, vol. 71(1-3), pages 9-20, May.
    6. Daniel Levy & Hashem Dezhbakhsh, 2003. "On the typical spectral shape of an economic variable," Applied Economics Letters, Taylor & Francis Journals, vol. 10(7), pages 417-423.
    7. Federico Mini & Guido De Blasio, 2000. "Seasonality and Capacity; An Application to Italy," IMF Working Papers 00/80, International Monetary Fund.
    8. Franses,Philip Hans & Dijk,Dick van & Opschoor,Anne, 2014. "Time Series Models for Business and Economic Forecasting," Cambridge Books, Cambridge University Press, number 9780521817707, April.
    9. Franses,Philip Hans & Dijk,Dick van & Opschoor,Anne, 2014. "Time Series Models for Business and Economic Forecasting," Cambridge Books, Cambridge University Press, number 9780521520911, April.
    10. Donald S. Allen, 1999. "Seasonal production smoothing," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 21-40.
    11. Donald S. Allen, 1999. "Seasonal production smoothing," Working Papers 1999-004, Federal Reserve Bank of St. Louis.

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