Do Seasonal Adjustments Induce Noncausal Dynamics in Inflation Rates?

Research output: Working paperProfessional

Abstract

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.
Original languageEnglish
PublisherMPRA Paper
Volume74922
Publication statusPublished - 4 Nov 2016

Publication series

SeriesMunich Personal RePEc Archive
Number74922

JEL classifications

  • c22 - "Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models"
  • e37 - Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications

Keywords

  • seasonality
  • inflation
  • seasonal adjustment filters
  • mixed causal-noncausal models
  • autoregressive

Research Output

  • 1 Working paper

Detecting Co-Movements in Noncausal Time Series

Cubadda, G., Hecq, A. & Telg, S., 2 Mar 2017, MPRA Paper, (Munich Personal RePEc Archive; No. 77254).

Research output: Working paperProfessional

Cite this

Hecq, A., Telg, S., & Lieb, L. (2016). Do Seasonal Adjustments Induce Noncausal Dynamics in Inflation Rates? MPRA Paper. Munich Personal RePEc Archive, No. 74922