SEASONALITY AND EQUILIBRIUM BUSINESS-CYCLE THEORIES

We consider a dynamic, stochastic equilibrium business cycle model whi ch is augmented to reflect seasonal shifts in preferences, technology, and government purchases. Our estimated parameterization implies impl ausibly large seasonal variation in the state of technology: rising at an annual rate of 24% in the fourth quarter and falling at an annual rate of 28% in the first quarter. Furthermore, our findings indicate t hat variation in the state of technology of this magnitude is required if the model is to explain the main features of the seasonal cycle.