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Performance of seasonal unit root tests for monthly data

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  • Paulo Rodrigues
  • Denise Osborn

Abstract

This paper uses Monte Carlo simulations to analyze the performance of several seasonal unit root tests for monthly time series. The tests are those of Dickey, Hasza and Fuller (DHF), Hylleberg, Engle, Granger and Yoo (HEGY), and Osborn, Chui, Smith and Birchenhall (OCSB). The unit root test of Dickey and Fuller (DF) is also considered. The results indicate that users have to be particularly cautious when applying the monthly version of the HEGY test. In general, the DHF and OCSB tests are preferable in terms of size and power, but these procedures may impose invalid restrictions. An empirical illustration is undertaken for UK two-digit industrial production indicators.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Journal of Applied Statistics.

Volume (Year): 26 (1999)
Issue (Month): 8 ()
Pages: 985-1004

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Handle: RePEc:taf:japsta:v:26:y:1999:i:8:p:985-1004

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References

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  1. Dickey, David A & Pantula, Sastry G, 2002. "Determining the Order of Differencing in Autoregressive Processes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 18-24, January.
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  3. Smith, R.J. & Taylor, R., 1995. "Additional Critical Values and Asymptotic Representations for Seasonal Unit Roots Tests," Cambridge Working Papers in Economics 9529, Faculty of Economics, University of Cambridge.
  4. Joseph Beaulieu, J. & Miron, Jeffrey A., 1993. "Seasonal unit roots in aggregate U.S. data," Journal of Econometrics, Elsevier, vol. 55(1-2), pages 305-328.
  5. Perron, P. & Ghysels, E., 1994. "The Effect of Linear Filters on Dynamic Time series with Structural Change," Cahiers de recherche 9425, Universite de Montreal, Departement de sciences economiques.
  6. Osborn, Denise R. & Heravi, Saeed & Birchenhall, C. R., 1999. "Seasonal unit roots and forecasts of two-digit European industrial production," International Journal of Forecasting, Elsevier, vol. 15(1), pages 27-47, February.
  7. Canova, Fabio & Hansen, Bruce E, 1995. "Are Seasonal Patterns Constant over Time? A Test for Seasonal Stability," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 237-52, July.
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  16. Dickey, David A., 1993. "Seasonal unit roots in aggregate U.S. data," Journal of Econometrics, Elsevier, vol. 55(1-2), pages 329-331.
  17. Ghysels, Eric & Lee, Hahn S. & Noh, Jaesum, 1994. "Testing for unit roots in seasonal time series : Some theoretical extensions and a Monte Carlo investigation," Journal of Econometrics, Elsevier, vol. 62(2), pages 415-442, June.
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  19. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107, September.
  20. Ilmakunnas, Pekka, 1990. "Testing the Order of Differencing in Quarterly Data: An Illustration of the Testing Sequence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(1), pages 79-88, February.
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Citations

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Cited by:
  1. Hampel, Katharina & Kunz, Marcus & Schanne, Norbert & Wapler, Rüdiger & Weyh, Antje, 2007. "Regional employment forecasts with spatial interdependencies," IAB Discussion Paper 200702, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  2. Martinez-Espineira, Roberto, 2005. "An Estimation of Residential Water Demand Using Co-Integration and Error Correction Techniques," MPRA Paper 615, University Library of Munich, Germany, revised Jan 2006.
  3. Rodrigues, P.M.M. & Franses, Ph.H.B.F., 2003. "A sequential approach to testing seasonal unit roots in high frequency data," Econometric Institute Research Papers EI 2003-14, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  4. Carlos Capistrán & Christian Constandse & Manuel Ramos Francia, 2009. "Using Seasonal Models to Forecast Short-Run Inflation in Mexico," Working Papers 2009-05, Banco de México.
  5. del Barrio Castro, Tomas, 2006. "On the performance of the DHF tests against nonstationary alternatives," Statistics & Probability Letters, Elsevier, vol. 76(3), pages 291-297, February.
  6. Norman Swanson & Richard Urbach, 2013. "Prediction and Simulation Using Simple Models Characterized by Nonstationarity and Seasonality," Departmental Working Papers 201323, Rutgers University, Department of Economics.
  7. Pami Dua & Lokendra Kumawat, 2005. "Modelling and Forecasting Seasonality in Indian Macroeconomic Time Series," Working papers 136, Centre for Development Economics, Delhi School of Economics.
  8. Artur Da Silva Lopes, 2004. "Deterministic Seasonality In Dickey-Fuller Tests: Should We Care?," Royal Economic Society Annual Conference 2004 75, Royal Economic Society.
  9. Capistrán, Carlos & Constandse, Christian & Ramos-Francia, Manuel, 2010. "Multi-horizon inflation forecasts using disaggregated data," Economic Modelling, Elsevier, vol. 27(3), pages 666-677, May.
  10. Gabriel Pons Rotger, 2004. "Seasonal Unit Root Testing Based on the Temporal Aggregation of Seasonal Cycles," Economics Working Papers 2004-1, School of Economics and Management, University of Aarhus.
  11. Denise Osborn & Paulo Rodrigues, 2002. "Asymptotic Distributions Of Seasonal Unit Root Tests: A Unifying Approach," Econometric Reviews, Taylor & Francis Journals, vol. 21(2), pages 221-241.
  12. 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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