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Time series with interdependent level and second moment: statistical testing and applications with Greek external trade and simulated data

Author

Listed:
  • Alexandros E. Milionis

    (Bank of Greece and University of the Aegean)

  • Nikolaos G. Galanopoulos

    (University of Athens)

Abstract

This work aims to fill an existing gap in the literature regarding the statistical testing for the existence and the identification of the character of time-varying second moment in its dependence on a non-constant mean level in time series. To this end a new statistical testing procedure is introduced with some considerable advantages over the existing ones. Amongst others it is argued that the existing statistical tests are insufficient and sometimes lead to biased results. Further the effect of the application of this methodology on some crucial elements of time series modelling such as outlier detection and seasonal adjustment is examined, through case studies conducted on a comparative basis using both the new methodology and an established one. The severe consequences of the improper treatment of the type of time-varying second moment dealt with in this work are evidenced and emphasized. The data set comprises time series on monthly external trade statistics for Greece. Overall, the resulting empirical evidence favours the new approach. Further supporting evidence is provided by the application of the new methodology to simulated data.

Suggested Citation

  • Alexandros E. Milionis & Nikolaos G. Galanopoulos, 2018. "Time series with interdependent level and second moment: statistical testing and applications with Greek external trade and simulated data," Working Papers 246, Bank of Greece.
    • Handle: RePEc:bog:wpaper:246
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    References listed on IDEAS

    as
    1. Alexandros Milionis, 2004. "The importance of variance stationarity in economic time series modelling. A practical approach," Applied Financial Economics, Taylor & Francis Journals, vol. 14(4), pages 265-278.
    2. Alexandros E. Milionis, 2003. "Modelling Economic Time Series in the Presence of Variance Non-Stationarity: A Practical Approach," Working Papers 07, Bank of Greece.
    3. Richard A. Hay JR & Richard McCleary, 1979. "Box-Tiao Time Series Models for Impact Assessment," Evaluation Review, , vol. 3(2), pages 277-314, May.
    4. Nelson, Harold Jr. & Granger, C. W. J., 1979. "Experience with using the Box-Cox transformation when forecasting economic time series," Journal of Econometrics, Elsevier, vol. 10(1), pages 57-69, April.
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    Cited by:

    1. Pinelopi Zioutou & Dimitris Sideris, 2018. "The energy sector: developments and prospects," Economic Bulletin, Bank of Greece, issue 47, pages 57-73, July.
    2. Zacharias Bragoudakis, 2018. "Are the price adjustments asymmetric in basic food categories? The case of the Greek food market," Economic Bulletin, Bank of Greece, issue 47, pages 75-91, July.
    3. Melina Vasardani & Dimitra Dimitropoulou, 2018. "The utilisation of EU structural funds in Greece," Economic Bulletin, Bank of Greece, issue 47, pages 31-55, July.
    4. Hiona Balfoussia & Dimitris Papageorgiou, 2018. "Real and financial cycles in the Greek economy," Economic Bulletin, Bank of Greece, issue 47, pages 7-30, July.
    5. Alexandros E. Milionis & Nikolaos G. Galanopoulos, 2020. "A study of the effect of data transformation and «linearization» on time series forecasts. A practical approach," Working Papers 280, Bank of Greece.

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    More about this item

    Keywords

    time series transformations; applied time series analysis; seasonal adjustment; detection of outliers; Greek external trade time series;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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