Spurious Persistence and Unit Roots due to Seasonal Differencing: The Case of Inflation Rates
Studying annual growth rates (seasonal differences) in case of seasonal data produces much more persistence, autocorrelation and stronger evidence in favour of a unit root than analyzing seasonal growth rates (ordinary differences). First, this statement is quantified theoretically. Second, it is supported experimentally which simulations, and, finally, it is empirically illustrated with quarterly GDP deflators from 7 European economies.
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Volume (Year): 225 (2005)
Issue (Month): 4 (July)
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