Seasonality and equilibrium business cycle theories

R. Braun and Charles Evans

No 45, Discussion Paper / Institute for Empirical Macroeconomics from Federal Reserve Bank of Minneapolis

Abstract: Barksy-Miron [1989] find that the postwar U.S. economy exhibits a regular seasonal cycle, as well as the business cycle phenomenon. Are these findings consistent with current equilibrium business cycle theories as surveyed by Prescott [1986]? We consider a dynamic, stochastic equilibrium business cycle model which includes deterministic seasonals and nontime-separable preferences. We show how to compute a perfect foresight seasonal equilibrium path for this economy. An approximation to the stochastic equilibrium is calculated. Using postwar U.S. data, GMM estimates of the structural parameters are employed in the perfect foresight and simulation analyses. As in Constantinides and Ferson [1990], the estimates of consumption preferences exhibit habit-persistence, but a local optimum also exists which exhibits local durability. ; The nontime-separable model predicts most of the seasonal patterns found in aggregate quantity time series; notable exceptions are the seasonal patterns in investment and the fourth quarter seasonal in labor hours. An evaluation of the models predictions for deseasonalized second moments finds strong support for the parameterization with local durability in consumption. This model broadly displays a seasonal cycle as well as the business cycle phenomenon.

Keywords: Business; cycles (search for similar items in EconPapers)
Date: 1991
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Seasonality and equilibrium business cycle theories (1995)
Working Paper: Seasonality and equilibrium business cycle theories (1994)
Working Paper: Seasonality and equilibrium business cycle theories (1991)
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