Functional data analysis of the dynamics of the monthly index of nondurable goods production

Functional data analysis techniques pioneered by Ramsay and Bernard Silverman are used to analyze the dynamics of a monthly nonseasonally adjusted index of production. After determining the order (three) of the ordinary differential equation that describes the data and estimating its coefficients; the time variation of each vector of coefficients is examined in detail to determine the evolutionary dynamics of each series over a 70-year span. The dynamical properties of the solution paths are also analyzed for their qualitative dynamics. The resulting models are used to examine the interaction between seasonal dynamics, dynamics at business cycle frequencies, and long-term growth. (C) 2002 Elsevier Science B.V. All rights reserved.