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On the (MIS)Specification of Seasonality and Its Consequences : An Empirical Investigation with U.S. Data

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Author Info

  • Ghysels, E.
  • Lee, H.S.
  • Siklos, P.L.

Abstract

It is well known that mis-specification of a trend leads to spurious cycles in detrended data (see, e.g., Nelson and Kang (1981). Seasonal-adjustment procedures make assumptions, either implicitly or explicitly, about roots on the unit circle both at the zero and seasonal frequencies. Consequently, seasonal-adjustment procedures may produce spurious seasonal variation and other statistically undesirable effects. In this paper we document, for a large class of widely used U.S. quarterly macroeconomic series, the effects of competing seasonal-adjustment procedures on the univariate time-series properties of the adjusted series. We also investigate which procedures are most appropriate given the properties of the data. Overall, we find very significant differences and evidence that several U.S. macroeconomic time series contain a mixture of deterministic and stochastic seasonal components.

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Bibliographic Info

Paper provided by Wilfrid Laurier University, Department of Economics in its series Working Papers with number 92008.

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Length: 45 pages
Date of creation: 1992
Date of revision:
Handle: RePEc:wlu:wpaper:92008

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Keywords: economic models ; econometrics;

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References

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  1. Canova, Fabio & Ghysels, Eric, 1994. "Changes in seasonal patterns : Are they cyclical?," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1143-1171, November.
  2. Nelson, Charles R & Kang, Heejoon, 1981. "Spurious Periodicity in Inappropriately Detrended Time Series," Econometrica, Econometric Society, vol. 49(3), pages 741-51, May.
  3. Osborn, Denise R., 1990. "A survey of seasonality in UK macroeconomic variables," International Journal of Forecasting, Elsevier, vol. 6(3), pages 327-336, October.
  4. Sims, Cristopher A, 1985. "Comment on "Issues Involved with the Seasonal Adjustment of Economic Time Series."," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 92-94, January.
  5. Robert B. Barsky & Jeffrey A. Miron, 1988. "The Seasonal Cycle and the Business Cycle," NBER Working Papers 2688, National Bureau of Economic Research, Inc.
  6. Ramey, Valerie A, 1989. "Inventories as Factors of Production and Economic Fluctuations," American Economic Review, American Economic Association, vol. 79(3), pages 338-54, June.
  7. Engle, R. F. & Granger, C. W. J. & Hylleberg, S. & Lee, H. S., 1993. "The Japanese consumption function," Journal of Econometrics, Elsevier, vol. 55(1-2), pages 275-298.
  8. Bell, William R & Hillmer, Steven C, 1984. "Issues Involved with the Seasonal Adjustment of Economic Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 291-320, October.
  9. Hall, Alastair R, 1994. "Testing for a Unit Root in Time Series with Pretest Data-Based Model Selection," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 461-70, October.
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Citations

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Cited by:
  1. Albertson, Kevin & Aylen, Jonathan, 1999. "Forecasting using a periodic transfer function: with an application to the UK price of ferrous scrap," International Journal of Forecasting, Elsevier, vol. 15(4), pages 409-419, October.
  2. Granger, C.W.J. & Siklos, P.L., 1993. "Systematic Sampling, Temporal Aggregation, Seasonal Adjustment, and Cointegration: Theory and Evidence," Working Papers 93001, Wilfrid Laurier University, Department of Economics.
  3. R. Anton Braun & Charles L. Evans, 1994. "Seasonality and equilibrium business cycle theories," Staff Report 168, Federal Reserve Bank of Minneapolis.
  4. Smith, Jeremy & Otero, Jesus, 1997. "Structural breaks and seasonal integration," Economics Letters, Elsevier, vol. 56(1), pages 13-19, September.
  5. Eric Ghysels & Denise R. Osborn & Paulo M. M. Rodrigues, 1999. "Seasonal Nonstationarity and Near-Nonstationarity," CIRANO Working Papers 99s-05, CIRANO.
  6. Ghysels, E., 1993. "A Time Series Model with Periodic Stochastic Regime Switching," Cahiers de recherche 9314, Centre interuniversitaire de recherche en ├ęconomie quantitative, CIREQ.
  7. Huang, Tai-Hsin & Shen, Chung-Hua, 1999. "Applying the seasonal error correction model to the demand for international reserves in Taiwan," Journal of International Money and Finance, Elsevier, vol. 18(1), pages 107-131, January.
  8. Hecq, Alain, 1998. "Does seasonal adjustment induce common cycles?," Economics Letters, Elsevier, vol. 59(3), pages 289-297, June.
  9. Chen, Nan-Kuang & Chen, Shiu-Sheng & Chou, Yu-Hsi, 2010. "House prices, collateral constraint, and the asymmetric effect on consumption," Journal of Housing Economics, Elsevier, vol. 19(1), pages 26-37, March.
  10. Shen Chung-Hua & Huang Tai-Hsin, 1999. "Money Demand and Seasonal Cointegration," International Economic Journal, Taylor & Francis Journals, vol. 13(3), pages 97-123.
  11. Hylleberg, Svend, 1995. "Tests for seasonal unit roots general to specific or specific to general?," Journal of Econometrics, Elsevier, vol. 69(1), pages 5-25, September.

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