Using different null hypotheses to test for seasonal unit roots in economic time series

Abstract

This paper tries to make a contribution by discussing the application of different testing procedures to determine the seasonal properties of quarterly data. We focus on the Hylleberg et al. and on the Canova-Hansen tests. The former detect a unit root at the zero frequency but no seasonal unit roots. The latter reveal that the series displays a statistically significant seasonal pattern with changing coefficients of some seasonal dummy variables. The CH tests finding of a seasonal unit root at frequency π does not agree with the HEGY-type test results. An explanation is given to try to interpret these two contradictory outcomes.