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The Unit Root Hypothesis in Long-term Output: Evidence from Two Structural Breaks for 16 Countries

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  • Ben-David, Dan
  • Lumsdaine, Robin L
  • Papell, David

Abstract

Recent literature has documented the sensitivity of unit root tests to failure to account for structural change. This paper reconsiders international evidence on the unit root hypothesis while allowing for two structural breaks. We find evidence of two breaks in three-quarters of the data, rejecting the unit root hypothesis in 50% more cases than models that allow for only one structural break. Most of the trend breaks are associated with a change in output levels. As the neo-classical growth model predicts, the magnitude of these level changes is shown here to be related to changes in growth rates during the period following the break.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1336.

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Date of creation: Feb 1996
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Handle: RePEc:cpr:ceprdp:1336

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Keywords: unit root hypothesis; trend breaks; growth;

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Cited by:
  1. Chan, Tze-Haw & Chong, Lee Lee & Khong, Wye Leong Roy, 2008. "Real Exchange Rate Behavior: New Evidence with Linear and Non-linear Endogenous Break(s)," MPRA Paper 3406, University Library of Munich, Germany.
  2. Joseph P. Byrne & Roger Perman, 2006. "Unit Roots and Structural Breaks: A Survey of the Literature," Working Papers 2006_10, Business School - Economics, University of Glasgow.
  3. Pedersen, Torben Mark & Elmer, Anne Marie, 2003. "International evidence on the connection between business cycles and economic growth," Journal of Macroeconomics, Elsevier, vol. 25(2), pages 255-275, June.
  4. Hossain, Mohammad & Tisdell, Clement A., 2003. "Fertility and Female Work Force Participation in Bangladesh: Causality and Cointegration," Social Economics, Policy and Development Working Papers 106947, University of Queensland, School of Economics.
  5. Franco Bevilacqua & Adriaan van Zon, 2002. "Random Walks and Non-Linear Paths in Macroeconomic Time Series: Some Evidence and Implications," Working Papers geewp22, Vienna University of Economics Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.

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