Do Seasonal Adjustments Induce Noncausal Dynamics in Inflation Rates?
Alain Hecq (),
Sean Telg () and
Lenard Lieb ()
Econometrics, 2017, vol. 5, issue 4, 1-22
This paper investigates the effect of seasonal adjustment filters on the identification of mixed causal-noncausal autoregressive models. By means of Monte Carlo simulations, we find that standard seasonal filters induce spurious autoregressive dynamics on white noise series, a phenomenon already documented in the literature. Using a symmetric argument, we show that those filters also generate a spurious noncausal component in the seasonally adjusted series, but preserve (although amplify) the existence of causal and noncausal relationships. This result has has important implications for modelling economic time series driven by expectation relationships. We consider inflation data on the G7 countries to illustrate these results.
Keywords: inflation; seasonal adjustment filters; mixed causal-noncausal models (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
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Working Paper: Do Seasonal Adjustments Induce Noncausal Dynamics in Inflation Rates? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jecnmx:v:5:y:2017:i:4:p:48-:d:117025
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