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Are US macroeconomic series difference stationary or trend-break stationary?

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  • Amit Sen
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    Abstract

    This article tests for the presence of a unit-root in all time series included in the extended Nelson-Plosser data set using the statistics devised by Zivot and Andrews, Perron and Murray and Zivot. It specifies the mixed model characterization of the trend-break stationary alternative that allows for a simultaneous break in both the intercept and slope of the trend-function. It rejects the unit-root null hypothesis for real GNP, nominal GNP, real per capita GNP, industrial production, employment, GNP deflator, nominal wages, interest rate and common stock prices. Use of appropriate critical values to assess the significance of the trend-function coefficients reveals that the slope-break should be included in real GNP, nominal GNP, real per capita GNP, nominal wages, interest rate and common stock prices. The results indicate that there is less evidence against the unit-root hypothesis with the extended Nelson-Plosser data compared to the original Nelson-Plosser data.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/0003684042000228696
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 36 (2004)
    Issue (Month): 18 ()
    Pages: 2025-2029

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    Handle: RePEc:taf:applec:v:36:y:2004:i:18:p:2025-2029

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    Web page: http://www.tandfonline.com/RAEC20

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    References

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    1. Banerjee, Anindya & Lumsdaine, Robin L & Stock, James H, 1992. "Recursive and Sequential Tests of the Unit-Root and Trend-Break Hypotheses: Theory and International Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 271-87, July.
    2. Nelson, C-R & Murray, C-J, 1997. "The Uncertain Trend in U.S. GDP," Discussion Papers in Economics at the University of Washington 97-05, Department of Economics at the University of Washington.
    3. Vogelsang, Timothy J & Perron, Pierre, 1998. "Additional Tests for a Unit Root Allowing for a Break in the Trend Function at an Unknown Time," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 1073-1100, November.
    4. 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..
    5. Vogelsang, T.I. & Perron, P., 1991. "Nonstationary and Level Shifts With An Application To Purchasing Power Parity," Papers 359, Princeton, Department of Economics - Econometric Research Program.
    6. 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.
    7. 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.
    8. 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.
    9. Chris Murray & Eric Zivot, 1998. "Inference on Unit Roots and Trend Breaks in Macroeconomic Time Series," Working Papers UWEC-2005-04, University of Washington, Department of Economics.
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    Cited by:
    1. Narayan, Paresh Kumar & Narayan, Seema & Smyth, Russell, 2011. "Energy consumption at business cycle horizons: The case of the United States," Energy Economics, Elsevier, vol. 33(2), pages 161-167, March.
    2. Charles, Amélie & Darné, Olivier, 2012. "Trends and random walks in macroeconomic time series: A reappraisal," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 167-180.

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