In this paper, we make use of state space models to investigate the presence of stochastic trends in economic time series. A model is specified where such a trend can enter either in the autoregressive representation or in a separate state equation. Tests based on the former are analogous to...

Changing seasonal patterns in economic time series can be described by auregressive models with seasonal unit roots or with deterministic sesaonal mean shifts.By means of simulation we demonstrate the impact of imposing the incorrect model on forecasting. We find for both cases that an...