Do Seasonal Adjustments Induce Noncausal Dynamics in Inflation Rates?
Alain Hecq (),
Sean Telg () and
Lenard Lieb ()
MPRA Paper from University Library of Munich, Germany
This paper investigates the effect of seasonal adjustment filters on the identification of mixed causal-noncausal autoregressive (MAR) models. By means of Monte Carlo simulations, we find that standard seasonal filters might induce spurious autoregressive dynamics, a phenomenon already documented in the literature. Symmetrically, we show that those filters also generate a spurious noncausal component in the seasonally adjusted series. The presence of this spurious noncausal feature has important implications for modelling economic time series driven by expectation relationships. An empirical application on European inflation data illustrates these results. In particular, whereas several inflation rates are forecastable on seasonally adjusted series, they appear to be white noise using raw data.
Keywords: seasonality; inflation; seasonal adjustment filters; mixed causal-noncausal models; autoregessive; noncausality; expectations (search for similar items in EconPapers)
JEL-codes: C22 E37 (search for similar items in EconPapers)
Date: 2016-11-04, Revised 2016-11-04
New Economics Papers: this item is included in nep-ecm and nep-mac
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Journal Article: Do Seasonal Adjustments Induce Noncausal Dynamics in Inflation Rates? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:74922
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