Trend-cycle-seasonal interactions: Identification and estimation

I. Hindrayanto, J P A M Jacobs*, D.R. Osborn, J. Tian

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

3 Citations (Scopus)
167 Downloads (Pure)

Abstract

Economists typically use seasonally adjusted data in which the assumption is imposed that seasonality is uncorrelated with trend and cycle. The importance of this assumption has been highlighted by the Great Recession. The paper examines an unobserved components model that permits nonzero correlations between seasonal and nonseasonal shocks. Identification conditions for estimation of the parameters are discussed from the perspectives of both analytical and simulation results. Applications to UK household consumption expenditures and US employment reject the zero correlation restrictions and also show that the correlation assumptions imposed have important implications about the evolution of the trend and cycle in the post-Great Recession period.
Original languageEnglish
Pages (from-to)3163-3188
Number of pages26
JournalMacroeconomic Dynamics
Volume23
Issue number8
DOIs
Publication statusPublished - Dec-2019

Keywords

  • Trend-Cycle-Seasonal Decomposition
  • Unobserved Components
  • Seasonal Adjustment
  • Employment
  • Great Recession
  • TIME-SERIES
  • BEVERIDGE-NELSON
  • COMPONENTS
  • DECOMPOSITIONS
  • INTEGRATION
  • PATTERNS

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