Seasonality in the Austrian Economy: Common Seasonals and Forecasting

Abstract: Seasonal cointegration generalizes the idea of cointegration to processes with unit roots at frequencies different from 0. Here, also the dual notion of common trends, "common seasonals", is adopted for the seasonal case. Using a five-variable macroeconomic core system of the Austrian economy, it is demonstrated how common seasonals and seasonal cointegrating vectors look in practice. Statistical tests provide clear evidence on seasonal cointegration in the system. However, it is shown that accounting for seasonal cointegration does not necessarily entail increased predictive accuracy for individual series. For the "master series" of GDP, seasonal cointegration modeling is profitable for very short forecast horizons but for long horizons simple seasonal dummies appear to dominate.;