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The Mysteries of Trend

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Abstract

Trends are ubiquitous in economic discourse, play a role in much economic theory, and have been intensively studied in econometrics over the last three decades. Yet the empirical economist, forecaster, and policy maker have little guidance from theory about the source and nature of trend behavior, even less guidance about practical formulations, and are heavily reliant on a limited class of stochastic trend, deterministic drift, and structural break models to use in applications. A vast econometric literature has emerged but the nature of trend remains elusive. In spite of being the dominant characteristic in much economic data, having a role in policy assessment that is often vital, and attracting intense academic and popular interest that extends well beyond the subject of economics, trends are little understood. This essay discusses some implications of these limitations, mentions some research opportunities, and briefly illustrates the extent of the difficulties in learning about trend phenomena even when the time series are far longer than those that are available in economics.

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Bibliographic Info

Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1771.

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Length: 12 pages
Date of creation: Sep 2010
Date of revision:
Publication status: Published in Macroeconomic Review (October 2010), Special Feature C, 82-89
Handle: RePEc:cwl:cwldpp:1771

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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

Related research

Keywords: Climate change; Etymology of trend; Paleoclimatology; Policy; Stochastic trend;

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Cited by:
  1. Jia Chen & Jiti Gao & Degui Li, 2010. "Semiparametric Trending Panel Data Models with Cross-Sectional Dependence," School of Economics Working Papers 2010-10, University of Adelaide, School of Economics.

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