The Analysis of Seasonal Economic Models

Many important insights can be obtained about economic relationships and seasonality when an economic model contains an explicit specification of the mechanism generating seasonality in the endogenous variables. Unfortunately, determining the correct structure is difficult. The purpose of this paper is to demonstrate a methodology for the analysis of seasonal economic models, In particular, several ways of incorporating seasonality into a structural model are considered and the implications for the behavior of the endogenous variables are derived. Finally, a rational expectations version of Cagan’s money demand function is analyzed to demonstrate some of the important aspects of the techniques and seasonal economic models in general.