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Time Series Analysis Of Bounded Economic Variables

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  • Kenneth F. Wallis

Abstract

. We propose the logistic transformation as an appropriate instantaneous transformation for time series variables known to be bounded, such as those measured as proportions, and present an application to two unemployment rate series. Since such series are often analysed in logarithmic form, the two transformations are compared, and a likelihood ratio selection criterion is developed, which marginally favours the logistic transformation. We consider the question of transformation bias and its removal. The logistic transformation of bounded variables ensures consistency with the limiting behaviour and is symmetric, thus on transforming and modelling the unemployment rate or its complement, the employment rate, equivalent results are obtained.

Suggested Citation

  • Kenneth F. Wallis, 1987. "Time Series Analysis Of Bounded Economic Variables," Journal of Time Series Analysis, Wiley Blackwell, vol. 8(1), pages 115-123, January.
    • Handle: RePEc:bla:jtsera:v:8:y:1987:i:1:p:115-123
    DOI: 10.1111/j.1467-9892.1987.tb00425.x
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