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Seasonality in Regression: An Application of Smoothness Priors

Author

Listed:
  • Mark Gersovitz
  • James G. MacKinnon

Abstract

This article argues that conventional approaches to the treatment of seasonality in econometric investigation are often inappropriate. A more appropriate technique is to allow all regression coefficients to vary with the season, but to constrain them to do so in a smooth fashion. A Bayesian method of estimating smoothly varying seasonal coefficients is developed, based on Shiller's (1973) approach to estimating distributed lags. In a sampling experiment, this technique outperforms ordinary least squares by a substantial margin. An application of this technique to the estimation of the demand for soft drinks is also presented.

Suggested Citation

  • Mark Gersovitz & James G. MacKinnon, 1977. "Seasonality in Regression: An Application of Smoothness Priors," Working Papers 257, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:257
    as

    Download full text from publisher

    File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_257.pdf
    File Function: First version 1977
    Download Restriction: no

    References listed on IDEAS

    as
    1. Michael C. Lovell, 1963. "Seasonal Adjustment of Economic Time Series and Multiple Regression," Cowles Foundation Discussion Papers 151, Cowles Foundation for Research in Economics, Yale University.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Svend Hylleberg, 2006. "Seasonal Adjustment," Economics Working Papers 2006-04, Department of Economics and Business Economics, Aarhus University.
    2. Richard M. Todd, 1989. "Periodic linear-quadratic methods for modeling seasonality," Staff Report 127, Federal Reserve Bank of Minneapolis.
    3. Robert J. Shiller, 1982. "Smoothness Priors and Nonlinear Regression," NBER Technical Working Papers 0025, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    seasonality; smoothness prior; distributed lag; mixed estimation; soft drinks;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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