Travis D. Nesmith
Federal Reserve Board
November 28, 2006
FEDS Working Paper No. 2007-04
Seasonal adjustment usually relies on statistical models of seasonality that treat seasonal fluctuations as noise corrupting the 'true' data. But seasonality in economic series often stems from economic behavior such as Christmas-time spending. Such economic seasonality invalidates the separability assumptions that justify the construction of aggregate economic indexes. To solve this problem, Diewert (1980, 1983, 1998, 1999) incorporates seasonal behavior into aggregation theory. Using duality theory, I extend these results to a larger class of decision problems. I also relax Diewert's assumption of homotheticity. I provide support for Diewert's preferred seasonally-adjusted economic index using weak separability assumptions that are shown to be sufficient.
Number of Pages in PDF File: 36
Keywords: Seasonality, index, numbers, separability, aggregation, duality theory
JEL Classification: C43, D11, E31working papers series
Date posted: March 21, 2007
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