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Spurious Persistence and Unit Roots due to Seasonal Differencing: The Case of Inflation Rates / Künstliche Persistenz und Einheitswurzeln infolge saisonaler Differenzen: Das Beispiel Inflationsraten

Author

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  • Hassler Uwe

    (Goethe-Universität Frankfurt, Fachbereich Wirtschaftswissenschaften, Institut für Statistik und Methoden der Ökonometrie, Gräfstraße 78, D-60054 Frankfurt/Main, Germany)

  • Demetrescu Matei

    (Goethe-Universität Frankfurt, Fachbereich Wirtschaftswissenschaften, Institut für Statistik und Methoden der Ökonometrie, Gräfstraße 78, D-60054 Frankfurt/Main, Germany)

Abstract

Studying annual growth rates (seasonal differences) in case of seasonal data produces much more persistence, autocorrelation and stronger evidence in favour of a unit root than analyzing seasonal growth rates (ordinary differences). First, this statement is quantified theoretically. Second, it is supported experimentally with simulations, and, finally, it is empirically illustrated with quarterly GDP deflators from 7 European economies.

Suggested Citation

  • Hassler Uwe & Demetrescu Matei, 2005. "Spurious Persistence and Unit Roots due to Seasonal Differencing: The Case of Inflation Rates / Künstliche Persistenz und Einheitswurzeln infolge saisonaler Differenzen: Das Beispiel Inflationsraten," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 225(4), pages 413-426, August.
    • Handle: RePEc:jns:jbstat:v:225:y:2005:i:4:p:413-426
    DOI: 10.1515/jbnst-2005-0404
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    References listed on IDEAS

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    Cited by:

    1. Pedro M. G. Martins, 2010. "Fiscal Dynamics in Ethiopia: The Cointegrated VAR Model with Quarterly Data," Working Paper Series 0910, Department of Economics, University of Sussex Business School.
    2. Bernd Aumann & Rolf Scheufele, 2010. "Is East Germany catching up? A time series perspective," Post-Communist Economies, Taylor & Francis Journals, vol. 22(2), pages 177-192.
    3. Pedro M G Martins, 2010. "Fiscal Dynamics in Ethiopia: A Cointegrated VAR Model with Quarterly Data," Discussion Papers 10/05, University of Nottingham, CREDIT.
    4. Giovanni Caggiano & Efrem Castelnuovo, 2008. "Long Memory and Non-Linearities in International Inflation," "Marco Fanno" Working Papers 0076, Dipartimento di Scienze Economiche "Marco Fanno".
    5. Jürgen Wolters & Uwe Hassler, 2006. "Unit Root Testing," Springer Books, in: Olaf Hübler & Jachim Frohn (ed.), Modern Econometric Analysis, chapter 4, pages 41-56, Springer.
    6. Hassler, Uwe, 2014. "Persistence under temporal aggregation and differencing," Economics Letters, Elsevier, vol. 124(2), pages 318-322.

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