Dynamics of lake-level fluctuations and economic activity

Abstract

This paper examines the relationship between lake level and economic activity in the context of population growth, regional economic conditions, and the seasonal nature of economic activity. Quarterly economic activity in four economic entities (i.e. three municipalities and the county) is examined in a multivariate time series analysis that accounts for the change in population, context of regional unemployment and seasonal variation. The results of the multivariate time series analysis demonstrate that lake level has a negative curvilinear relationship with economic activity. This relationship is limited to the retail trade sector in the nearest municipality, which also has the least diversified economy. Tests show that prior lake levels can forecast retail trade in this limited case, which indicates lake level is causally prior to retail trade.