AN ANALOG MODEL OF PHASE-AVERAGING PROCEDURES

This paper analyses the statistical and econometric effects that fixed n-period phase-averaging has on time series generated by some simple dynamic processes. We focus on the variance and autocorrelation of the data series and of the disturbance term for levels and difference equations involving the phase-average data. Further, we consider the effect of phase-averaging on the exogeneity of variables in those equations and the implications phase-averaging has for conducting statistical inference. To illustrate these analytical results, we examine features of the observed annual and phase-average series on money, income, prices, and interest rates from Friedman and Schwartz (1982). While the analogue model developed above is a simplified characterisation of the NBER phase-averaging techniques employed by Friedman and Schwartz, it does offer several insights into the likely consequences of this approach. © 1990.