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Is real GDP per capita a stationary process? Smooth transitions, nonlinear trends and unit root testing

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  • Juan Cuestas
  • Dean Garratt

Abstract

The aim of this paper is to provide additional evidence about the order of integration of constant price GDP per capita in a selection of countries. It does so by taking into account the possibility of non-linear deterministic trends and of asymmetric adjustment towards equilibrium. We find evidence of a global stationary ESTAR process around a nonlinear deterministic trend in almost half of the selected countries. These results show that nonlinearities affect real GDP series. By neglecting them, one can draw misleading conclusions from unit root tests. Specifically, the paper questions the so-called stylised fact of a near unit root which has so influenced macroeconomic thought over the past two decades.
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  • Juan Cuestas & Dean Garratt, 2011. "Is real GDP per capita a stationary process? Smooth transitions, nonlinear trends and unit root testing," Empirical Economics, Springer, vol. 41(3), pages 555-563, December.
    • Handle: RePEc:spr:empeco:v:41:y:2011:i:3:p:555-563
    DOI: 10.1007/s00181-010-0389-0
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    Cited by:

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    2. Burak GÜRIŞ & İpek M. YURTTAGÜLER & Muhammed TIRAŞOĞLU, 2017. "Unemployment convergence analysis for Nordic countries: Evidence from linear and nonlinear unit root tests," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 45-56, Spring.
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    4. Lange, Steffen & Pütz, Peter & Kopp, Thomas, 2018. "Do Mature Economies Grow Exponentially?," Ecological Economics, Elsevier, vol. 147(C), pages 123-133.
    5. Burak Güriş & Burcu Yavuz Tiftikçigil & Muhammed Tıraşoğlu, 2017. "Testing for unemployment hysteresis in Turkey: evidence from nonlinear unit root tests," Quality & Quantity: International Journal of Methodology, Springer, vol. 51(1), pages 35-46, January.
    6. Mikhail Stolbov, 2017. "Causality between credit depth and economic growth: evidence from 24 OECD countries," Empirical Economics, Springer, vol. 53(2), pages 493-524, September.
    7. neifar, malika, 2020. "Efficiency-Market Hypothesis: case of Tunisian and 6 ‎Asian stock markets ‎," MPRA Paper 103232, University Library of Munich, Germany.
    8. Phiri, Andrew, 2018. "Robust analysis of convergence in per capita GDP in BRICS economies," MPRA Paper 86936, University Library of Munich, Germany.
    9. Jan Bentzen, 2015. "Comparing data sources of real GDP in purchasing power parities," Applied Economics Letters, Taylor & Francis Journals, vol. 22(16), pages 1303-1308, November.
    10. Ivan Kitov, 2012. "Why price inflation in developed countries is systematically underestimated," Papers 1206.0450, arXiv.org.
    11. Juan Laborda & Sonia Ruano & Ignacio Zamanillo, 2023. "Multi-Country and Multi-Horizon GDP Forecasting Using Temporal Fusion Transformers," Mathematics, MDPI, vol. 11(12), pages 1-26, June.
    12. Emmanuel Anoruo & Vasudeva N.R. Murthy, 2014. "Testing Nonlinear Inflation Convergence for the Central African Economic and Monetary Community," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 1-7.
    13. Helmut Herwartz & Yabibal M. Walle, 2018. "A powerful wild bootstrap diagnosis of panel unit roots under linear trends and time-varying volatility," Computational Statistics, Springer, vol. 33(1), pages 379-411, March.
    14. repec:zbw:bofitp:urn:nbn:fi:bof-201505061169 is not listed on IDEAS
    15. Sakiru Solarin & Emmanuel Anoruo, 2015. "Nonlinearity and the Unit Root Hypothesis for African Per Capita Real GDP," International Economic Journal, Taylor & Francis Journals, vol. 29(4), pages 617-630, December.
    16. Kaufmann, Hendrik & Kruse, Robinson & Sibbertsen, Philipp, 2012. "On tests for linearity against STAR models with deterministic trends," Economics Letters, Elsevier, vol. 117(1), pages 268-271.
    17. repec:bof:bofitp:urn:nbn:fi:bof-201505061169 is not listed on IDEAS
    18. Sakiru Adebola Solarin, 2017. "Testing for the Stationarity in Total Factor Productivity: Nonlinearity Evidence from 79 Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(1), pages 141-158, March.
    19. Burak GÜRIŞ & İpek M. YURTTAGÜLER & Muhammed TIRAŞOĞLU, 2017. "Unemployment convergence analysis for Nordic countries: Evidence from linear and nonlinear unit root tests," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 45-56, Spring.
    20. Ömer YALÇINKAYA & Ali Kemal ÇELİK, 2021. "The Impact of Global Uncertainties on Economic Growth: Evidence from the US Economy (1996: Q1-2018: Q4)," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 35-54, June.
    21. Mikhail Stolbov, 2017. "Causality between credit depth and economic growth: evidence from 24 OECD countries," Empirical Economics, Springer, vol. 53(2), pages 493-524, September.

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    More about this item

    Keywords

    Real GDP per capita; Unit root tests; Persistence; Nonlinearities; Smooth transitions; C22; E31; E32;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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