Spurious Persistence and Unit Roots due to Seasonal Differencing: The Case of Inflation Rates
AbstractStudying annual growth rates (seasonal differences) in case of seasonal data produces much more persistence, autocorrelation and stronger evidence in favour of a unit root than analyzing seasonal growth rates (ordinary differences). First, this statement is quantified theoretically. Second, it is supported experimentally which simulations, and, finally, it is empirically illustrated with quarterly GDP deflators from 7 European economies.
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Bibliographic InfoArticle provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.
Volume (Year): 225 (2005)
Issue (Month): 4 (July)
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Annual growth rates; nonstationarity; Dickey-Fuller test; loss of power;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
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