Business cycles, seasonal cycles, and common trends

This paper examines the econometric implications of real business cycle models at long-run and seasonal frequencies using U.S. data. It finds little support for the hypothesis that consumption, investment and output are driven by a common long-run trend, despite previous results to the contrary based on seasonally adjusted data. There is evidence of a strong seasonal cycle in these variables, but these seasonal patterns change over time and are therefore not deterministic. Consumption and investment appear to be cointegrated with output at seasonal frequencies, indicating that these variables share a common seasonal stochastic trend.