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Decisions on Seasonal Unit Roots

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  • Robert M. Kunst
  • Michael Reutter

Abstract

Decisions on the presence of seasonal unit roots in economic time series are commonly taken on the basis of statistical hypothesis tests. Some of these tests have absence of unit roots as the null hypothesis, while others use unit roots as their null. Following a suggestion by Hylleberg (1995) to combine such tests in order to reach a clearer conclusion, we evaluate the merits of such test combinations on the basis of a Bayesian decision setup. We find that the potential gains over a pure application of the most common test due to Hylleberg et al. (1990) are small.

Suggested Citation

  • Robert M. Kunst & Michael Reutter, 2000. "Decisions on Seasonal Unit Roots," CESifo Working Paper Series 286, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_286
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    File URL: http://www.cesifo-group.de/DocDL/cesifo_wp286.pdf
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    References listed on IDEAS

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    1. Hylleberg, S. & Engle, R. F. & Granger, C. W. J. & Yoo, B. S., 1990. "Seasonal integration and cointegration," Journal of Econometrics, Elsevier, vol. 44(1-2), pages 215-238.
    2. Franses, Philip Hans, 1996. "Periodicity and Stochastic Trends in Economic Time Series," OUP Catalogue, Oxford University Press, number 9780198774549.
    3. Michio Hatanaka & Yasuji Koto, 1995. "Are There Unit Roots In Real Economic Variables? (An Encompassing Analysis Of Difference And Trend Stationarity)," The Japanese Economic Review, Japanese Economic Association, vol. 46(2), pages 166-190, June.
    4. Ghysels, Eric & Perron, Pierre, 1993. "The effect of seasonal adjustment filters on tests for a unit root," Journal of Econometrics, Elsevier, vol. 55(1-2), pages 57-98.
    5. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    6. Canova, Fabio & Hansen, Bruce E, 1995. "Are Seasonal Patterns Constant over Time? A Test for Seasonal Stability," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 237-252, July.
    7. Franses, Philip Hans & Kunst, Robert M, 1999. " On the Role of Seasonal Intercepts in Seasonal Cointegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(3), pages 409-433, August.
    8. Hatanaka, Michio, 1996. "Time-Series-Based Econometrics: Unit Roots and Co-integrations," OUP Catalogue, Oxford University Press, number 9780198773535.
    9. Lee, Hahn Shik, 1992. "Maximum likelihood inference on cointegration and seasonal cointegration," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 1-47.
    10. Karim M. Abadir & A. M. Robert Taylor, "undated". "On the Definitions of (Co-)Integration," Discussion Papers 97/19, Department of Economics, University of York.
    11. Caner, Mehmet, 1998. "A Locally Optimal Seaosnal Unit-Root Test," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 349-356, July.
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    Cited by:

    1. Jumah, Adusei & Kunst, Robert M., 2006. "Seasonal Cycles in European Agricultural Commodity Prices," Economics Series 192, Institute for Advanced Studies.
    2. Kunst, Robert M., 2002. "Testing for Stationarity in a Cointegrated System," Economics Series 117, Institute for Advanced Studies.
    3. Kunst, Robert M., 2005. "Approaches for the Joint Evaluation of Hypothesis Tests: Classical Testing, Bayes Testing, and Joint Confirmation," Economics Series 177, Institute for Advanced Studies.
    4. Kunst, Robert M., 2002. "Decision Maps for Bivariate Time Series with Potential Thrshold Cointegration," Economics Series 121, Institute for Advanced Studies.

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