BUSINESS CYCLES, SEASONAL CYCLES, AND COMMON TRENDS

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