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Are Unit Root Tests Useful in the Debate over the (Non)Stationarity of Hours Worked?

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Author Info

  • Amélie Charles

    (Audencia Nantes, School of Management - Audencia, School of Management)

  • Olivier Darné

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)

  • Fabien Tripier

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)

Abstract

This article compares the performances of some non-stationarity tests on simulated series, using the business-cycle model of Chang et al. (2007) [Y. Chang, T. Doh, F. Schorfheide, (2007). Non-stationary Hours in a DSGE Model. Journal of Money, Credit and Banking 39, 357-1373] as data generating process. Overall, Monte Carlo simulations show that the efficient unit root tests of Ng and Perron (2001) [Ng, S., Perron, P. (2001). Lag length selection and the construction of unit root tests with good size and power. Econometrica 69, 1519-1554] are more powerful than the standard non-stationarity tests (ADF and KPSS). More precisely, these efficient tests are able to reject frequently the unit-root hypothesis on simulated series using the best specification of business-cycle model found by Chang et al. (2007), in which hours worked are stationary with adjustment costs.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number hal-00527122.

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Date of creation: 18 Oct 2010
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Handle: RePEc:hal:wpaper:hal-00527122

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Related research

Keywords: unit root rest; DSGE models; hours worked;

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