Why Do Countries and Industries with Large Seasonal Cycles Also Have Large Business Cycles?
Year: 1991
Type: report
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.
DOI: 10.3386/w3635
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2890177302