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Deterministic, Stochastic, and Segmented Trends in Aggregate Output: A Cross-Country Analysis

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  • Cheung, Yin-Wong
  • Chinn, Menzie David

Abstract

This paper examines whether output per capita in 126 countries is better described as trend or difference stationary, using appropriate finite-sample critical values. Depending upon whether one uses solely a test with a trend stationary null, or solely one with a difference stationary null, very different conclusions are obtained. This outcome suggests that it is useful to consider the tests complementary, rather than competing. The authors find that, when a definite characterization of GDP can be made, it is very likely to indicate a difference stationary process. However, the likelihood of making definite conclusions does vary positively with both income level and data quality. Copyright 1996 by Royal Economic Society.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 48 (1996)
Issue (Month): 1 (January)
Pages: 134-62

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Handle: RePEc:oup:oxecpp:v:48:y:1996:i:1:p:134-62

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  1. Lawrence J. Christiano & Martin Eichenbaum, 1989. "Unit roots in real GNP: do we know, and do we care?," Discussion Paper / Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis 18, Federal Reserve Bank of Minneapolis.
  2. Cogley, T., 1989. "International Evidence On The Size Of The Random Walk In Output," Working Papers, University of Washington, Department of Economics 89-02, University of Washington, Department of Economics.
  3. Hall, Alastair R, 1994. "Testing for a Unit Root in Time Series with Pretest Data-Based Model Selection," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 12(4), pages 461-70, October.
  4. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, Elsevier, vol. 2(2), pages 111-120, July.
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  6. Anindya Banerjee & Robin L. Lumsdaine & James H. Stock, 1990. "Recursive and Sequential Tests of the Unit Root and Trend Break Hypothesis: Theory and International Evidence," NBER Working Papers 3510, National Bureau of Economic Research, Inc.
  7. Zelhorst, Dick & de Haan, Jakob, 1995. "Testing for a Break in Output: New International Evidence," Oxford Economic Papers, Oxford University Press, Oxford University Press, vol. 47(2), pages 357-62, April.
  8. Shiller, Robert J. & Perron, Pierre, 1985. "Testing the random walk hypothesis : Power versus frequency of observation," Economics Letters, Elsevier, Elsevier, vol. 18(4), pages 381-386.
  9. Perron, Pierre, 1990. "Testing for a Unit Root in a Time Series with a Changing Mean," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 8(2), pages 153-62, April.
  10. Rudebusch, Glenn D, 1993. "The Uncertain Unit Root in Real GNP," American Economic Review, American Economic Association, American Economic Association, vol. 83(1), pages 264-72, March.
  11. Harris, R I D, 1992. "Small Sample Testing for Unit Roots," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 54(4), pages 615-25, November.
  12. Leybourne, S J & McCabe, B P M, 1994. "A Consistent Test for a Unit Root," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 12(2), pages 157-66, April.
  13. Cheung, Yin-Wong, 1994. "Aggregate output dynamics in the twentieth century," Economics Letters, Elsevier, Elsevier, vol. 45(1), pages 15-22, May.
  14. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 979, Cowles Foundation for Research in Economics, Yale University.
  15. Andrew B. Bernard & Steven N. Durlauf, 1991. "Convergence of International Output Movements," NBER Working Papers 3717, National Bureau of Economic Research, Inc.
  16. Summers, Robert & Heston, Alan, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 327-68, May.
  17. Kormendi, Roger C & Meguire, Philip, 1990. "A Multicountry Characterization of the Nonstationarity of Aggregate Output," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 22(1), pages 77-93, February.
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