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Non-Parametric Test for the Existence of the Common Deterministic Cycle: The Case of the Selected European Countries

Author

Listed:
  • Łukasz Lenart

    () (Cracow University of Economics)

  • Mateusz Pipień

    () (Cracow University of Economics)

Abstract

The aim of the article is to construct an asymptotically consistent test, based on a subsampling approach, to verify hypothesis about existence of the individual or common deterministic cycle in coordinates of multivariate macroeconomic time series. By the deterministic cycle we mean the periodic or almost periodic fluctuations in the mean function in cyclical fluctuations. To construct test we formulate a multivariate non-parametric model containing the business cycle component in the unconditional mean function. The construction relies on the Fourier representation of the unconditional expectation of the multivariate Almost Periodically Correlated time series and is related to fixed deterministic cycle presented in the literature. The analysis of the existence of common deterministic business cycles for selected European countries is presented based on monthly industrial production indexes. Our main findings from the empirical part is that the deterministic cycle can be strongly supported by the data and therefore should not be automatically neglected during analysis without justification.

Suggested Citation

  • Łukasz Lenart & Mateusz Pipień, 2017. "Non-Parametric Test for the Existence of the Common Deterministic Cycle: The Case of the Selected European Countries," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 9(3), pages 201-241, September.
  • Handle: RePEc:psc:journl:v:9:y:2017:i:3:p:201-241
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    More about this item

    Keywords

    testing deterministic cycles; subsampling; spectral analysis; almost periodic mean function; Almost Periodically Correlated time series;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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