Spurious deterministic seasonality and autocorrelation corrections with quarterly data: Further Monte Carlo results
AbstractFollowing recent work of Franses, Hylleberg and Lee (FHL), this paper analyses the consequences of fitting a deterministic seasonal model to a quarterly time series which can be (at least approximately) described by a seasonal unit root(s) model. Besides the distribution of the coefficient of determination, the empirical distributions of two commonly used statistics are also investigated through Monte Carlo experiments for small, moderately large and large samples. FHL's work is also extended allowing the possibility of residual autocorrelation corrections. The main conclusion that emerges from the results is that one should not try to measure the importance of deterministic seasonality nor test for its presence in the context of such (static) regression models, even when using some form of residual autocorrelation correction. A simple empirical application is provided to illustrate our results.
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Bibliographic InfoArticle provided by Springer in its journal Empirical Economics.
Volume (Year): 24 (1999)
Issue (Month): 2 ()
Note: received: July 1997/final version received: July 1998
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- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
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- da Silva Lopes, Artur C. B., 2001. "The robustness of tests for seasonal differencing to structural breaks," Economics Letters, Elsevier, vol. 71(2), pages 173-179, May.
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- Artur C. B. da Silva Lopes, 2004. "Deterministic Seasonality in Dickey-Fuller Tests: Should We Care?," Econometrics 0402007, EconWPA, revised 18 Mar 2004.
- Ghassen El Montasser & Talel Boufateh & Fakhri Issaoui, 2013.
"The Seasonal KPSS Test When Neglecting Seasonal Dummies: A Monte Carlo analysis,"
EERI Research Paper Series
EERI RP 2013/07, Economics and Econometrics Research Institute (EERI), Brussels.
- El Montasser, Ghassen & Boufateh, Talel & Issaoui, Fakhri, 2013. "The seasonal KPSS test when neglecting seasonal dummies: a Monte Carlo analysis," MPRA Paper 46226, University Library of Munich, Germany.
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