Spurious deterministic seasonality

https://doi.org/10.1016/0165-1765(94)00638-IGet rights and content

Abstract

It is sometimes assumed that the R2 of a regression of a first-order differenced time series on seasonal dummy variables reflects the amount of seasonal fluctuations that can be explained by deterministic variation in the series. In this paper we show that neglecting the presence of seasonal unit roots may yield spuriously high values of this coefficient.

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The first author thanks the Royal Netherlands Academy of Arts and Sciences for its financial support. The third author acknowledges the financial support of Tulane University through a short-term research grant. Thanks are also due to Bart Hobijn for research assistance.

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