Autori
Fiorentini, Gabriele
Maravall, Augustin

Titolo
Unobserved components in arch models: an application to seasonal adjustment
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1994 - Fascicolo: 7 - Pagina iniziale: 1 - Pagina finale: 32

In the context of an application, the paper deals with unobserved components in Arima models with Garch errors. The application is seasonal adjustment of the monthly Spanish money supply series, which shows clear evidence of (moderate) nonlinearity, that does not disappear with simple outlier correction. The Garch structure explains reasonably well the nonlinearity, and this explanation is robust with respect to the Garch specification. The time variation of the standard error of the adjusted series estimator is of applied interest. We first show how to measure this variation, and the implications it may have on short-term monetary control. The nonlinearity seems to have a small effect in practice. It is further seen that the conditional variance of the Garch process may, in turn, be decomposed into components. In fact, the conditional variance of the money supply series is the sum of a weak linear trend, a strong nonlinear seasonal component, and a moderate nonlinear irregular component. This information has policy implications: for example there are periods in the year when policy can be more assertive because information is more precise. Finally, a comment is made on the interaction among nonlinearity in the components of the money supply that shows how linear combinations of nonlinear series can produce series that behave linearly.



Testo completo: http://hdl.handle.net/1814/487

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