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Identifying the Sources of Seasonal Effects in an indirectly adjusted Chain-Linked Aggregate: A Framework for the Annual Overlap Method

Cobb, Marcus (2014): Identifying the Sources of Seasonal Effects in an indirectly adjusted Chain-Linked Aggregate: A Framework for the Annual Overlap Method.

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Abstract

The use of chain-linked methods reduces significantly the problem of price structure obsolescence present in fixed base environments. However, price updating introduces a new dimension that may produce confusion if not accounted for. Probably the most notorious difficulty generated by the introduction of chain-linked indices to the measurement of GDP has been that the aggregate is not the direct sum of its components, thus not only making it harder to explain its behaviour but also making it more cumbersome to work with the series in a consistent manner. Because of the non-additivity of the components, one of the processes that have been affected is that of the indirect seasonal adjustment. This document presents a consistent framework to identify and track down the sources of seasonal effects to its components in an aggregate measure chain-linked using the annual overlap method. This is done based on the decomposition of component’s contributions and the indirect seasonal adjustment. The framework allows separating the effects on growth rates into non-systematic seasonal effects, systematic seasonality and changes in systematic seasonality.

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