Abstract
In this paper the HEGY testing procedure (Hylleberg et al. 1990) of analyzing seasonal unit roots is tried to be re-examined by allowing for seasonal mean shifts with exogenous break points. Using some Monte Carlo experiments the distribution of the HEGY and the extended HEGY tests for seasonal unit roots subject to mean shifts and the small sample behavior of the test statistics have been investigated. Based on an empirical analysis upon the conventional money demand relationships in the Turkish economy, our results indicate that seasonal unit roots appear for the GDP deflator, real M2 and the expected inflation variables while seasonal unit roots at annual frequency seem to be disappear for the real M1 balances when the possible structural changes in one or more seasons at 1994 and 2001 crisis years have been taken into account. .
Highlights
The study of the seasonal properties of the economic time series has been of a special interest for both academicians and researchers in the last decades
When some recent literature has been examined we can see that modelling seasonality in relation to the HEGY seasonal unit root testing with one structural break is conducted by investigation of a break point
We propose a modification of the Hylleberg et al (1990) (HEGY) procedure based on innovative outlier model for testing seasonal unit roots
Summary
The study of the seasonal properties of the economic time series has been of a special interest for both academicians and researchers in the last decades. When some recent literature has been examined we can see that modelling seasonality in relation to the HEGY seasonal unit root testing with one structural break is conducted by investigation of a break point Papers such as Zivot and Andrews (1992), Smith and Otero (1997), Franses and Vogelsang (1995) and Franses and Hobijn (1997) extend the HEGY procedure in implementing the unit root testing by allowing for a known breakpoint, while Franses and Vogelsang (1998), Balcombe (1999), Harvey et al (2001) and a recent paper by Popp (2007) try to consider the case of an unknown breakpoint to be recursively estimated from the data
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