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An Application of a New Seasonal Unit Root Test for Trending and Breaking Series to Industrial Production of the BRICS

Author

Listed:
  • Ghassen El Montasser

    (École Supérieure de Commerce de Tunis, Université de la Manouba)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

Abstract

The persistence of macroeconomic shocks is one of the most investigated issues in empirical economics. Given the importance of industrial production, a highly seasonal variable with possible breaks, as measure of output in econometric models, in this study, we investigate the persistence property of the quarterly industrial production of Brazil, Russia, India, China and South Africa, covering the period of earl 1990s till the last quarter of 2013, with the industrial production for BRICS characterized by strong seasonality and upward trend. For our purpose, we use the seasonal unit root test developed by Popp (2007), which controls for not only seasonal and trending behavior, but also for a break of unknown timing in seasonal means. Our results indicate that, while there exist a non-seasonal unit root in the industrial production for Brazil, India and China, there is a strong evidence a seasonal unit root at Nyquist frequency for only China. In addition, there is a strong evidence of rejection of bi-annual unit roots in all BRICS industrial production. Accordingly, some policy implications can be formulated for China as it is the only country, among the BRICS, which exhibits a seasonal unit root in its industrial production. Our results therefore, suggest that economists should examine the evolution of industrial production in China not only at the business cycle frequencies but also at the seasonal as well.

Suggested Citation

  • Ghassen El Montasser & Rangan Gupta, 2014. "An Application of a New Seasonal Unit Root Test for Trending and Breaking Series to Industrial Production of the BRICS," Working Papers 201435, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201435
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    Keywords

    Seasonal unit root tests; Structural breaks; Linear time trend; Industrial production; BRICS;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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