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The Effect of Seasonal Adjustment on the Properties of Business Cycle Regimes

Antonio Matas-Mir, Denise Osborn () and Marco Lombardi ()
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Antonio Matas-Mir: European Central Bank, http://www.ecb.int

Authors registered in the RePEc Author Service: Antonio Matas Mir

Econometrics Working Papers Archive from Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti"

Abstract: We study the impact of seasonal adjustment on the properties of business cycle expansion and recession regimes using analytical, simulation and empirical methods. Analytically, we show that the X-11 adjustment filter both reduces the magnitude of change at turning points and reduces the depth of recessions, with specific effects depending on the length of the recession. A simulation analysis using Markov switching models confirms these properties, with particularly undesirable effects in delaying the recognition of the end of a recession. However, seasonal adjustment can have desirable properties in clarifying the true regime when this is well underway. The empirical findings, based on four coincident US business cycle indicators, reinforce the analytical and simulation results by showing that seasonal adjustment leads to the identification of longer and shallower recessions than obtained using unadjusted data.

Pages: 37
Date: 2005-09
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mac
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Forthcoming Journal of Applied Econometrics

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Journal Article: The effect of seasonal adjustment on the properties of business cycle regimes (2008) Downloads
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