How sensitive are estimated trends to data definitions? Results for East Asian and G-5 countries
AbstractThis paper examines whether test results characterizing per capita output as either trend or difference stationary are sensitive to whether output is valued in domestic currency terms, or in some international numeraire, such as the Summers and Heston (1991) international dollar. Using the conventional ADF test, and the Kwiatkowski et al. (1992) test with a trend stationary null, we find that for economies such as those of the East Asian countries, the best description of the persistence of the data does depend upon the valuation of output. No such discrepancy is found for the output series of the G-5 countries. We conclude that researchers should be extremely cautious about making generalizations regarding the time series properties of output.
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