Seasonality in Dynamic Regression Models (Now published in Economic Journal 104 (1994), pp.1324-1345.)

Andrew Harvey and Andrew Scott

STICERD - Econometrics Paper Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: This paper examines the implications of treating seasonality as an unobserved component which changes slowly over time. This approach simplifies the specification of dynamic relationships by separating non-seasonal from seasonal factors. We illustrate this approch using the consumption model of Davidson et al (1978) and estimate a stable error correction model between consumption, income and prices over the period 1958-92. More generally, we argue that autoregressive models are unlikely to successfully model slowly changing seasonality, and may confound seasonal effects with the dynamic responses of prime interest. Our approach can be used in a wide range of cases and we show that there is little loss in efficiency even if seasonality is deterministic

Keywords: Seasonality; dynamic relationships; stable error correction model; autoregressive models (search for similar items in EconPapers)
Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:cep:stiecm:266

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