Periodic Cointegration: Representation and Inference

H. Peter Boswijk () and Philip Hans Franses

The Review of Economics and Statistics, 1995, vol. 77, issue 3, 436-54

Abstract: This paper considers a new approach to the analysis of stable relationships between nonstationary seasonal time series. The basis of this approach is an error correction model in which both long-run effects and adjustment parameters are allowed to vary per season. First, we discuss theoretical arguments for such a periodic error correction model. We define periodic cointegration and compare this to the concept of seasonal cointegration. Next, we analyze statistical inference in the periodic error correction model. A sequential procedure is proposed, consisting of a test for periodic cointegration, an estimator of the cointegration parameters and adjustment coefficients, and a class of tests for the hypothesis that some of the parameters are constant over the seasons. The finite sample behavior of the proposed test statistics is analyzed in a limited Monte Carlo exercise. We conclude the paper with an application to a model of aggregate Swedish consumption. Copyright 1995 by MIT Press.

Date: 1995
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