Advanced Search
MyIDEAS: Login

Trends and random walks in macroeconomic time series: A reappraisal

Contents:

Author Info

  • Charles, Amélie
  • Darné, Olivier

Abstract

In this paper we re-analyze the nature of the trend (deterministic or stochastic) in the Nelson–Plosser macroeconomic data set from an alternative method relative to the previous studies. We underline the effects of large, but infrequent shocks due to major economic or financial events on US macroeconomic time series, such as the Great Depression, World War II and recessions, using outlier methodology. We apply an ADF test corrected for detected outliers based on intervention models and calculate the specific critical values of the unit root tests for each series. The results point out the rejection of the unit root null hypothesis for five of the fourteen Nelson–Plosser macroeconomic time series, namely real GNP, real per capita GNP, industrial production, employment and unemployment.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0164070411000723
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 34 (2012)
Issue (Month): 1 ()
Pages: 167-180

as in new window
Handle: RePEc:eee:jmacro:v:34:y:2012:i:1:p:167-180

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622617

Related research

Keywords: Macroeconomic time series; Unit root; Outliers;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
  2. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Technical Working Papers 0100, National Bureau of Economic Research, Inc.
  3. Kim, Tae-Hwan & Leybourne, Stephen J & Newbold, Paul, 2000. " Spurious Rejections by Perron Tests in the Presence of a Break," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(3), pages 433-44, July.
  4. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
  5. Elena Andreou & Aris Spanos, 2003. "Statistical Adequacy and the Testing of Trend Versus Difference Stationarity," Econometric Reviews, Taylor & Francis Journals, vol. 22(3), pages 217-237.
  6. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
  7. Monta s, Antonio & Reyes, Marcelo, 1998. "Effect Of A Shift In The Trend Function On Dickey Fuller Unit Root Tests," Econometric Theory, Cambridge University Press, vol. 14(03), pages 355-363, June.
  8. Rappoport, Peter & Reichlin, Lucrezia, 1989. "Segmented Trends and Non-stationary Time Series," Economic Journal, Royal Economic Society, vol. 99(395), pages 168-77, Supplemen.
  9. Orphanides, Athanasios, 2003. "Historical monetary policy analysis and the Taylor rule," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 983-1022, July.
  10. Nathan S. Balke & Thomas B. Fomby, 1991. "Large shocks, small shocks, and economic fluctuations: outliers in macroeconomic times series," Research Paper 9101, Federal Reserve Bank of Dallas.
  11. Perron, P., 1994. "Further Evidence on Breaking Trend Functions in Macroeconomic Variables," Cahiers de recherche 9421, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  12. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  13. Schotman, Peter C & van Dijk, Herman K, 1991. "On Bayesian Routes to Unit Roots," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(4), pages 387-401, Oct.-Dec..
  14. David H Papell & Ruxandra Prodan, 2007. "Restricted Structural Change And The Unit Root Hypothesis," Economic Inquiry, Western Economic Association International, vol. 45(4), pages 834-853, October.
  15. Leybourne, Stephen J. & C. Mills, Terence & Newbold, Paul, 1998. "Spurious rejections by Dickey-Fuller tests in the presence of a break under the null," Journal of Econometrics, Elsevier, vol. 87(1), pages 191-203, August.
  16. Montanes, Antonio & Olloqui, Irene & Calvo, Elena, 2005. "Selection of the break in the Perron-type tests," Journal of Econometrics, Elsevier, vol. 129(1-2), pages 41-64.
  17. Balke, Nathan S, 1993. "Detecting Level Shifts in Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 81-92, January.
  18. Gabriel Rodríguez, 2004. "An empirical note about additive outliers and nonstationarity in Latin-American inflation series," Empirical Economics, Springer, vol. 29(2), pages 361-372, 05.
  19. Olivier Darné & Amélie Charles, 2009. "Large shocks in U.S. macroeconomic time series: 1860–1988," Working Papers hal-00422502, HAL.
  20. Franses, Philip Hans & Haldrup, Niels, 1994. "The Effects of Additive Outliers on Tests for Unit Roots and Cointegration," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 471-78, October.
  21. Banerjee, Anindya & Urga, Giovanni, 2005. "Modelling structural breaks, long memory and stock market volatility: an overview," Journal of Econometrics, Elsevier, vol. 129(1-2), pages 1-34.
  22. Sen, Amit, 2003. "On Unit-Root Tests When the Alternative Is a Trend-Break Stationary Process," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 174-84, January.
  23. Luiz Lima & Jaime de Jesus Filho, 2008. "Further investigation of the uncertain trend in US GDP," Applied Economics, Taylor & Francis Journals, vol. 40(9), pages 1207-1216.
  24. Cavaliere, Giuseppe & Georgiev, Iliyan, 2009. "Robust Inference In Autoregressions With Multiple Outliers," Econometric Theory, Cambridge University Press, vol. 25(06), pages 1625-1661, December.
  25. Perron, P. & Rodriguez, G., 2000. "Seraching for Additive Outliers in Nonstationary Time Series," Working Papers 0005e, University of Ottawa, Department of Economics.
  26. Lucas, Andre, 1995. "An outlier robust unit root test with an application to the extended Nelson-Plosser data," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 153-173.
  27. Jussi Tolvi, 2001. "Outliers in eleven Finnish macroeconomic time series," Finnish Economic Papers, Finnish Economic Association, vol. 14(1), pages 14-32, Spring.
  28. Amit Sen, 2004. "Are US macroeconomic series difference stationary or trend-break stationary?," Applied Economics, Taylor & Francis Journals, vol. 36(18), pages 2025-2029.
  29. Escanciano, J. Carlos & Lobato, Ignacio N., 2009. "An automatic Portmanteau test for serial correlation," Journal of Econometrics, Elsevier, vol. 151(2), pages 140-149, August.
  30. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
  31. Bradley, Michael D & Jansen, Dennis W, 1995. "Unit Roots and Infrequent Large Shocks: New International Evidence on Output Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 867-93, August.
  32. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
  33. Luiz Renato Lima & Zhijie Xiao, 2004. "Testing Unit Root Based on Partially Adaptive Estimation," Econometric Society 2004 Latin American Meetings 63, Econometric Society.
  34. Sen, Amit, 2008. "Behaviour of Dickey-Fuller tests when there is a break under the unit root null hypothesis," Statistics & Probability Letters, Elsevier, vol. 78(6), pages 622-628, April.
  35. Hoek, Henk & Lucas, Andre & van Dijk, Herman K., 1995. "Classical and Bayesian aspects of robust unit root inference," Journal of Econometrics, Elsevier, vol. 69(1), pages 27-59, September.
  36. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  37. Darne, Olivier & Diebolt, Claude, 2004. "Unit roots and infrequent large shocks: new international evidence on output," Journal of Monetary Economics, Elsevier, vol. 51(7), pages 1449-1465, October.
  38. Shin, Dong Wan & Sarkar, Sahadeb & Lee, Jong Hyup, 1996. "Unit root tests for time series with outliers," Statistics & Probability Letters, Elsevier, vol. 30(3), pages 189-197, October.
  39. Li, Hongyi, 1995. "A Reexamination of the Nelson-Plosser Data Set Using Recursive and Sequential Tests," Empirical Economics, Springer, vol. 20(3), pages 501-18.
  40. Nunes, Luis C & Newbold, Paul & Kuan, Chung-Ming, 1997. "Testing for Unit Roots with Breaks: Evidence on the Great Crash and the Unit Root Hypothesis Reconsidered," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(4), pages 435-48, November.
  41. Lee, Junsoo & Strazicich, Mark C, 2001. " Break Point Estimation and Spurious Rejections with Endogenous Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(5), pages 535-58, December.
  42. Lucas, André, 1995. "Unit Root Tests Based on M Estimators," Econometric Theory, Cambridge University Press, vol. 11(02), pages 331-346, February.
  43. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
  44. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
  45. Niels Haldrup & Andreu Sansó, 2006. "A Note on the Vogelsang Test for Additive Outliers," Economics Working Papers 2006-01, School of Economics and Management, University of Aarhus.
  46. Balke, Nathan S. & Fomby, Thomas B., 1991. "Shifting trends, segmented trends, and infrequent permanent shocks," Journal of Monetary Economics, Elsevier, vol. 28(1), pages 61-85, August.
  47. Harvey, David I & Leybourne, Stephen J & Newbold, Paul, 2001. " Innovational Outlier Unit Root Tests with an Endogenously Determined Break in Level," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(5), pages 559-75, December.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:34:y:2012:i:1:p:167-180. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.