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Econometrics 2017, 5(4), 48; https://doi.org/10.3390/econometrics5040048

Do Seasonal Adjustments Induce Noncausal Dynamics in Inflation Rates?

1
Department of Quantitative Economics, Maastricht University, School of Business and Economics, P.O. Box 616, 6200 MD Maastricht, The Netherlands
2
Department of General Economics (Macro), Maastricht University, School of Business and Economics, P.O. Box 616, 6200 MD Maastricht, The Netherlands
*
Author to whom correspondence should be addressed.
Academic Editors: Gilles Dufrénot, Fredj Jawadi, Alexander Mihailov and Marc S. Paolella
Received: 12 June 2017 / Revised: 27 September 2017 / Accepted: 17 October 2017 / Published: 31 October 2017
Full-Text   |   PDF [884 KB, uploaded 31 October 2017]   |  

Abstract

This paper investigates the effect of seasonal adjustment filters on the identification of mixed causal-noncausal autoregressive models. By means of Monte Carlo simulations, we find that standard seasonal filters induce spurious autoregressive dynamics on white noise series, a phenomenon already documented in the literature. Using a symmetric argument, we show that those filters also generate a spurious noncausal component in the seasonally adjusted series, but preserve (although amplify) the existence of causal and noncausal relationships. This result has has important implications for modelling economic time series driven by expectation relationships. We consider inflation data on the G7 countries to illustrate these results. View Full-Text
Keywords: inflation; seasonal adjustment filters; mixed causal-noncausal models inflation; seasonal adjustment filters; mixed causal-noncausal models
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).
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Hecq, A.; Telg, S.; Lieb, L. Do Seasonal Adjustments Induce Noncausal Dynamics in Inflation Rates? Econometrics 2017, 5, 48.

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