Dairy supply response under stochastic trend and seasonality
Developing a dairy supply model assuming deterministic trend and seasonality a priori could lead to model misspecification. A structural time series methodology was used to examine the role of stochastic trend and seasonality in a dairy supply response model using quarterly time series data. Four versions of a time-linked model of dairy supply response were compared. A dairy supply model with stochastic seasonality and deterministic trend performed the best, as evidenced by diagnostic tests, goodness-of-fit measures, and forecasting accuracy. Our analysis suggested against the classic approach of incorporating the deterministic seasonality component in dairy supply models.
Publication Source (Journal or Book title)
Applied Economics Letters
Adhikari, M., Paudel, K., Houstan, J., & Bukenya, J. (2007). Dairy supply response under stochastic trend and seasonality. Applied Economics Letters, 887-891. https://doi.org/10.1080/13504850600689907