Dear Johannes,
Thank you very much for your helpful guidance, I am grateful.
I am preparing data like exchange rate and stock prices, both of which are of monthly frequency, and I need to change them into quarterly data. For stock variables/non-flow data, should I taking the average of each month for the quarterly data? Or should I take the last monthly observation as the quarterly data? I have read the literature, regarding monthly stock prices and exchange rates, some researchers take mean value of monthly data into quarterly data, however, some researchers say that only the last observation of monthly data should be taken as the quarterly observations, because averaging monthly stock prices into quarterly version introduces spurious serial correlation in returns (the âWorking effectâ), and they say I should calculate returns using end of quarter natural log prices. However, in the attached paper, monthly stock prices are averaged to obtain quarterly series, please refer to the PDF attachment on page 1710 (I have highlighted them in yellow).DSGE1.pdf (674.7 KB)
I have another question, do most DSGE models have variables not percentualized? Because on the same page of the PDF document, it says âall variables are not percentualized.â
Thank you very much and look forward to hearing from you.
Best regards,
Jesse