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

47 Pages Posted: 8 Jan 2008 Last revised: 9 Dec 2022

See all articles by Joe Beaulieu

Joe Beaulieu

Board of Governors of the Federal Reserve - Division of Research and Statistics - Industrial Output Section; National Bureau of Economic Research (NBER)

Jeffrey K. MacKie-Mason

UC Berkeley; University of Michigan

Jeffrey A. Miron

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: February 1991

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.

Suggested Citation

Beaulieu, J. Joseph and MacKie-Mason, Jeffrey K. and Miron, Jeffrey A., Why Do Countries and Industries with Large Seasonal Cycles Also Have Large Business Cycles? (February 1991). NBER Working Paper No. w3635, Available at SSRN: https://ssrn.com/abstract=471565

J. Joseph Beaulieu (Contact Author)

Board of Governors of the Federal Reserve - Division of Research and Statistics - Industrial Output Section

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Jeffrey K. MacKie-Mason

UC Berkeley ( email )

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University of Michigan ( email )

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Jeffrey A. Miron

Harvard University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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