Restricted Structural Change And The Unit Root Hypothesis
Abstract"In a classic paper, Nelson and Plosser could not reject the unit root hypothesis in favor of trend stationarity for 13 out of 14 long-term annual macro series. Subsequent studies, allowing for one or two structural changes, have found more rejections with a broken trend stationary alternative. Since these changes are defined to be permanent, the rejections do not provide evidence of trend stationarity. We propose new tests for a unit root in the presence of restricted structural change. Allowing for two offsetting structural changes, we reject the unit root null in favor of restricted trend stationarity for 6 out of 13 series. "("JEL "C22, E32) Copyright 2007 Western Economic Association International.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 45 (2007)
Issue (Month): 4 (October)
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- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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