Asymmetry and nonstationarity for a seasonal time series model

Dong Wan Shin, Oesook Lee

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

Tests for symmetry and seasonal unit roots are developed for an extended model of Hylleberg et al. (1990. Seasonal integration and cointegration. Journal Econometrics 44, 215-238.) which can represent both partial seasonal unit roots and threshold effects. Methods based on ordinary least squares (OLS) estimation and instrumental variable (IV) estimation are proposed and compared. For adjusting mean functions, ordinary mean adjustment and recursive mean adjustment are both considered. Several tests are constructed from various combination of estimation schemes and mean adjustment schemes. Among the tests, the tests based on IV-estimation are recommended because they have very simple limiting null distributions and have finite sample power properties comparable to those based on the OLSE. The recommended tests are applied to a US unemployment rate data set and find evidences for both nonstationarities associated with zero frequency and threshold effects.

Original languageEnglish
Pages (from-to)89-114
Number of pages26
JournalJournal of Econometrics
Volume136
Issue number1
DOIs
StatePublished - Jan 2007

Keywords

  • Gaussian asymptotics
  • HEGY model
  • Instrumental variable estimation
  • Recursive mean adjustment
  • Unemployment rate

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