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Searching for a Break in GNP

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  • Christiano, Lawrence J

Abstract

It has been suggested that existing estimates of the long-run impact of a surprise move in income may have a substantial upward bias due to the presence of a trend break in postwar U.S. gross national product data. This article shows that the statistical evidence does not warrant abandoning the no-trend-break null hypothesis. A key part of the argument is that conventionally computed p values overstate the likelihood of the trend-break alternative hypothesis. This is because they do not take into account that, in practice, the date is chosen based on pretest examination of the data.

Suggested Citation

  • Christiano, Lawrence J, 1992. "Searching for a Break in GNP," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 237-250, July.
  • Handle: RePEc:bes:jnlbes:v:10:y:1992:i:3:p:237-50
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    References listed on IDEAS

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    1. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, pages 9-22.
    2. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-775, August.
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    8. John Y. Campbell & N. Gregory Mankiw, 1987. "Are Output Fluctuations Transitory?," The Quarterly Journal of Economics, Oxford University Press, pages 857-880.
    9. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, pages 1361-1401.
    10. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, pages 357-384.
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