INTERACTIONS BETWEEN THE SEASONAL AND BUSINESS CYCLES IN PRODUCTION AND INVENTORIES

This paper shows that in several U.S. manufacturing industries, the se asonal variability of production and inventories varies with the state of the business cycle. We present a simple model which implies that i f firms reduce the seasonal variability of their production as the eco nomy strengthens, and they either hold constant or increase the stock of inventories they bring into the high-production seasons of the year , then they must be facing upward-sloping and convex marginal cost cur ves. We conclude that firms in a number of industries face upward-slop ing and convex marginal-production-cost curves.