Communications for Statistical Applications and Methods

The Korean Statistical Society (한국통계학회)
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Testing of Stochastic Trends, Seasonal and Cyclical Components in Macroeconomil Time Series

  • Gil-Alana Luis A. (University of Navarre, Department of Economics)
  • Published : 2005.04.01
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Abstract

We propose in this article a procedure for testing unit and fractional orders of integration, with the roots simultaneously occurring in the trend, the seasonal and the cyclical component of the time series. The tests have standard null and local limit distributions. However, finite sample critical values are computed, and several Monte Carlo experiments conducted across the paper show that the rejection frequencies against unit (and fractional) orders of integration are relatively high in all cases. The tests are applied to the UK consumption and income series, the results showing the importance of the roots corresponding to the trend and the seasonal components and, though the unit roots are found to be fairly suitable models, we show that fractional processes (including one for the cyclical component) may also be plausible alternatives in some cases.

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References

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