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Trend-cycle-seasonal interactions: Identification and estimation

Hindrayanto, I, Jacobs, JPAM, Osborn, DR and Tian, J ORCID: 0000-0002-0186-4412 2018 , 'Trend-cycle-seasonal interactions: Identification and estimation' , Macroeconomic Dynamics , pp. 1-26 , doi: 10.1017/S1365100517001092.

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Abstract

Economists typically use seasonally adjusted data in which the assumption is imposedthat seasonality is uncorrelated with trend and cycle. The importance of this assumptionhas been highlighted by the Great Recession. The paper examines an unobservedcomponents model that permits nonzero correlations between seasonal and nonseasonalshocks. Identification conditions for estimation of the parameters are discussed from theperspectives of both analytical and simulation results. Applications to UK householdconsumption expenditures and US employment reject the zero correlation restrictions andalso show that the correlation assumptions imposed have important implications about theevolution of the trend and cycle in the post-Great Recession period.

Item Type: Article
Authors/Creators:Hindrayanto, I and Jacobs, JPAM and Osborn, DR and Tian, J
Keywords: trend-cycle-seasonal decomposition, unobserved components, seasonal adjustment, employment; Great Recession
Journal or Publication Title: Macroeconomic Dynamics
Publisher: Cambridge Univ Press
ISSN: 1365-1005
DOI / ID Number: 10.1017/S1365100517001092
Copyright Information:

Copyright 2018 Cambridge University Press

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