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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. Nelson, Charles R & Kang, Heejoon, 1981. "Spurious Periodicity in Inappropriately Detrended Time Series," Econometrica, Econometric Society, vol. 49(3), pages 741-51, May.
  2. Osborn, Denise R., 1990. "A survey of seasonality in UK macroeconomic variables," International Journal of Forecasting, Elsevier, vol. 6(3), pages 327-336, October.
  3. Canova, F. & Ghysels, E., 1992. "Changes in Seasonal Patters: Are They Cyclical," Cahiers de recherche 9216, Universite de Montreal, Departement de sciences economiques.
  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. 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.
  6. Engle, R.F. & Granger, C.W.J. & Hylleberg, S. & Lee, H.S., 1990. "Seasonal Cointegration: The Japanese Consumption Function," Economics Working Papers 1990-10, School of Economics and Management, University of Aarhus.
  7. Robert B. Barsky & Jeffrey A. Miron, 1989. "The Seasonal Cycle and the Business Cycle," NBER Working Papers 2688, National Bureau of Economic Research, Inc.
  8. 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.
  9. 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.
  10. 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.
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Citations

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Cited by:
  1. 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.
  2. Ghysels, E., 1993. "A Time Series Model with Periodic Stochastic Regime Switching," Cahiers de recherche 9314, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  3. R. Anton Braun & Charles L. Evans, 1991. "Seasonality and equilibrium business cycle theories," Working Paper Series, Macroeconomic Issues 91-23, Federal Reserve Bank of Chicago.
  4. Shen Chung-Hua & Huang Tai-Hsin, 1999. "Money Demand and Seasonal Cointegration," International Economic Journal, Korean International Economic Association, vol. 13(3), pages 97-123.
  5. Granger, C. W. J. & Siklos, Pierre L., 1995. "Systematic sampling, temporal aggregation, seasonal adjustment, and cointegration theory and evidence," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 357-369.
  6. 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.
  7. Hylleberg, S., 1993. "Tests for Seasonal Unit Roots General to Specific or Specific to General?," Economics Working Papers 1993-14, School of Economics and Management, University of Aarhus.
  8. Hecq, Alain, 1998. "Does seasonal adjustment induce common cycles?," Open Access publications from Maastricht University urn:nbn:nl:ui:27-15784, Maastricht University.
  9. 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.
  10. Eric Ghysels & Denise R. Osborn & Paulo M. M. Rodrigues, 1999. "Seasonal Nonstationarity and Near-Nonstationarity," CIRANO Working Papers 99s-05, CIRANO.
  11. Smith, Jeremy & Otero, Jesus, 1997. "Structural breaks and seasonal integration," Economics Letters, Elsevier, vol. 56(1), pages 13-19, September.

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