This paper considers a new approach to the analysis of stable relationships between nonstationary seasonal time series. The basis of this approach is an error correction model in which both long-run effects and adjustment parameters are allowed to vary per season. First, we discuss theoretical arguments for such a periodic error correction model. We define periodic cointegration and compare this to the concept of seasonal cointegration. Next, we analyze statistical inference in the periodic error correction model A sequential procedure is proposed, consisting of a test for periodic cointegration, an estimator of the cointegration parameters and adjustment coefficients, and a class of tests for the hypothesis that some of the parameters are constant over the seasons. The finite sample behavior of the proposed test statistics is analyzed in a limited Monte Carlo exercise. We conclude the paper with an application to a model of aggregate Swedish consumption.

Additional Metadata
Keywords cointegration, consumption (economics), demand (economic theory), econometric models, econometrics, economics, time series analysis
Persistent URL hdl.handle.net/1765/2061
Journal The Review of Economics and Statistics
Citation
Franses, Ph.H.B.F, & Boswijk, H.P. (1995). Periodic cointegration - Representation and Inference. The Review of Economics and Statistics, 436–454. Retrieved from http://hdl.handle.net/1765/2061