On the role of seasonal intercepts in seasonal cointegration

In the paper we consider the role of seasonal intercepts in seasonal cointe gration analysis. For the nonseasonal unit root, such intercepts can genera te a stochastic trend with a drift common to all observations. For the seas onal unit roots, however, we show that unrestricted seasonal intercepts gen erate trends that are different across the seasons. Since such seasonal tre nds may not appear in economic data, we propose a modified empirical method to test for seasonal cointegration. We evaluate our method using Monte Car lo simulations and using a four-dimensional data set of Austrian macroecono mic variables.