On Trend-Cycle-Seasonal Interactions

32 Pages Posted: 13 Mar 2014

See all articles by Irma Hindrayanto

Irma Hindrayanto

De Nederlandsche Bank

Jan P. A. M. Jacobs

University of Groningen - Faculty of Economics and Business

Denise R. Osborn

University of Manchester - School of Social Sciences; University of Tasmania

Date Written: March 12, 2014

Abstract

Traditional unobserved component models assume that the trend, cycle and seasonal components of an individual time series evolve separately over time. Although this assumption has been relaxed in recent papers that focus on trend-cycle interactions, it remains at the core of all seasonal adjustment methods applied by official statistical agencies around the world. The present paper develops an unobserved components model that permits non-zero correlations between seasonal and non-seasonal shocks, hence allowing testing of the uncorrelated assumption that is traditionally imposed. Identification conditions for estimation of the parameters are discussed, while applications to observed time series illustrate the model and its implications for seasonal adjustment.

Keywords: trend-cycle-seasonal decomposition, unobserved components, state-space models, seasonal adjustment, global real economic activity, unemployment

JEL Classification: C22, E24, E32, E37, F01

Suggested Citation

Hindrayanto, Irma and Jacobs, Jan P.A.M. and Osborn, Denise R., On Trend-Cycle-Seasonal Interactions (March 12, 2014). De Nederlandsche Bank Working Paper No. 417. Available at SSRN: https://ssrn.com/abstract=2407920 or http://dx.doi.org/10.2139/ssrn.2407920

Irma Hindrayanto (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Jan P.A.M. Jacobs

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Denise R. Osborn

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

University of Tasmania ( email )

French Street
Sandy Bay
Tasmania, 7250
Australia

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