Why Do Countries and Industries with Large Seasonal Cycles also Have Large Business Cycles?
The authors 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, the authors discuss possible explanations and develop a model that generates their 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, the authors find evidence supporting one of its key empirical implications. Copyright 1992, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 107 (1992)
Issue (Month): 2 (May)
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