A periodic cointegration model of quarterly consumption

✍ Scribed by Franses, Philip Hans ;Kloek, Teun

• Book ID: 102754950
• Publisher: John Wiley and Sons
• Year: 1995
• Tongue: English
• Weight: 508 KB
• Volume: 11
• Category: Article
• ISSN: 8755-0024
• DOI: 10.1002/asm.3150110206

✦ Synopsis

A periodic cointegration model is proposed to describe quarterly observed consumption. This model allows the cointegrating vectors and the adjustment parameters to vary with the seasons. Its links are discussed with an often considered standard economic theoretical model for macroeconomic variables like consumption. A simple empirical model specification strategy is given and applied to Austrian consumption and income data. KEY WORDS time series; seasonality, periodic models One such ECM which allows for an explicit description of seasonal fluctuations is the socalled seasonal cointegration model proposed by Engle et u ~, ~ which is applied to describe consumption and income in Japan. This seasonal error correction model (SECM) extends the usual ECM by investigating the presence of long-run relationships between stochastic seasonal trends.

As noted by Osbom,6 and as we indicate in Section 3 below, a drawback of the SECM is that it assumes that the cointegration relations vary with the lags, which may be hard to interpret CCC 8755-0024/95/020 159-08