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Can Economic Time Series Be Differenced to Stationarity?

Listed author(s):
  • Leybourne, S J
  • McCabe, B P M
  • Tremayne, A R

This paper considers a class of nonstationary varying coefficient autoregressive models which allow stochastic variability in the autoregressive root. It is argued that such models provide a better description of the behaviour of macroeconomic variables than fixed unit root autoregressive models as they allow more general forms of nonstationarity. We construct a test of the null hypothesis of a fixed unit root against the alternative of a fixed unit root against the alternative of a randomized root with unit mean, and derive its asymptotic distribution. The test is applied to a number of U.S. macroeconomic series generally considered to contain fixed unit roots. We find that for about half of the series the fixed unit root null is rejected.

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Article provided by American Statistical Association in its journal Journal of Business and Economic Statistics.

Volume (Year): 14 (1996)
Issue (Month): 4 (October)
Pages: 435-446

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Handle: RePEc:bes:jnlbes:v:14:y:1996:i:4:p:435-46
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