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Further Investigation of the Uncertain Unit Root in GNP

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  • Cheung, Yin-Wong
  • Chinn, Menzie D

Abstract

A more powerful version of the ADF test and a test that has trend stationarity as the null are applied to U.S. GNP. Simulated critical values generated from plausible trend and difference stationary models are used in order to minimize possible finite sample biases. The discriminatory power of the two tests is evaluated using alternative-specific rejection frequencies. For post-War quarterly data, these two tests do not provide a definite conclusion. However, when analyzing annual data over the 1869-1986 period, the unit root null is rejected, while the trend stationary null is not.

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Article provided by American Statistical Association in its journal Journal of Business and Economic Statistics.

Volume (Year): 15 (1997)
Issue (Month): 1 (January)
Pages: 68-73

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Handle: RePEc:bes:jnlbes:v:15:y:1997:i:1:p:68-73

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  1. Perron,P., 1988. "Testing For A Random Walk: A Simulation Experiment Of Power When The Simpling Interval Is Varied," Papers 336, Princeton, Department of Economics - Econometric Research Program.
  2. Perron, Pierre & Phillips, Peter C. B., 1987. "Does GNP have a unit root? : A re-evaluation," Economics Letters, Elsevier, vol. 23(2), pages 139-145.
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  7. Cheung, Yin-Wong & Lai, Kon S, 1995. "Lag Order and Critical Values of a Modified Dickey-Fuller Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(3), pages 411-19, August.
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