Stochastic and deterministic trends in Finnish macroeconomic time series
The appropriateness of the Dickey-Fuller unit root test is studied using two alternative unit root test models. The segmented trend model is strongly supported and the second-order trend model is favoured for some series. The sample set consists of observations of nine basic macroeconomic time series describing the fundamentals of the Finnish economy between 1860 and 1989. The results clearly show that care is required in interpreting unit-root tests since failure to reject does not entail that the null is true. Structural breaks in the data generating process, in this case wars starting in 1917 and 1939, support models of the deterministic trends class. However, it is argued that the univariate testing procedures laid down in the unit root literature do not provide information to macroeconomic controversies.
Volume (Year): 5 (1992)
Issue (Month): 2 (Autumn)
|Contact details of provider:|| Web page: http://www.taloustieteellinenyhdistys.fi|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Peter C.B. Phillips & Sam Ouliaris & Joon Y. Park, 1988. "Testing for a Unit Root in the Presence of a Maintained Trend," Cowles Foundation Discussion Papers 880, Cowles Foundation for Research in Economics, Yale University.
- Hylleberg, Svend & Mizon, Grayham E., 1989. "A note on the distribution of the least squares estimator of a random walk with drift," Economics Letters, Elsevier, vol. 29(3), pages 225-230.
- Lawrence J. Christiano & Martin Eichenbaum, 1990.
"Unit roots in real GNP: do we know, and do we care?,"
Working Paper Series, Macroeconomic Issues
90-2, Federal Reserve Bank of Chicago.
- Christiano, Lawrence J. & Eichenbaum, Martin, 1990. "Unit roots in real GNP: Do we know, and do we care?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 7-61, January.
- Lawrence J. Christiano & Martin Eichenbaum, 1989. "Unit roots in real GNP: do we know, and do we care?," Discussion Paper / Institute for Empirical Macroeconomics 18, Federal Reserve Bank of Minneapolis.
- Lawrence J. Christiano & Martin Eichenbaum, 1989. "Unit Roots in Real GNP: Do We Know, and Do We Care?," NBER Working Papers 3130, National Bureau of Economic Research, Inc.
- Banerjee, Anindya & Lumsdaine, Robin L & Stock, James H, 1992.
"Recursive and Sequential Tests of the Unit-Root and Trend-Break Hypotheses: Theory and International Evidence,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 10(3), pages 271-287, July.
- Anindya Banerjee & Robin L. Lumsdaine & James H. Stock, 1990. "Recursive and Sequential Tests of the Unit Root and Trend Break Hypothesis: Theory and International Evidence," NBER Working Papers 3510, National Bureau of Economic Research, Inc.
- Cochrane, John H., 1991. "A critique of the application of unit root tests," Journal of Economic Dynamics and Control, Elsevier, vol. 15(2), pages 275-284, April.
- Peter C.B. Phillips, 1989.
"Time Series Regression with a Unit Root and Infinite Variance Errors,"
Cowles Foundation Discussion Papers
897R, Cowles Foundation for Research in Economics, Yale University, revised Aug 1989.
- Phillips, P.C.B., 1990. "Time Series Regression With a Unit Root and Infinite-Variance Errors," Econometric Theory, Cambridge University Press, vol. 6(01), pages 44-62, March.
- Lawrence J. Christiano, 1988.
"Searching For a Break in GNP,"
NBER Working Papers
2695, National Bureau of Economic Research, Inc.
- Phillips, Peter C. B. & Loretan, Mico, 1991.
"The Durbin-Watson ratio under infinite-variance errors,"
Journal of Econometrics,
Elsevier, vol. 47(1), pages 85-114, January.
- Peter C.B. Phillips & Mico Loretan, 1989. "The Durbin-Watson Ratio Under Infinite Variance Errors," Cowles Foundation Discussion Papers 898R, Cowles Foundation for Research in Economics, Yale University, revised Aug 1989.
- Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
When requesting a correction, please mention this item's handle: RePEc:fep:journl:v:5:y:1992:i:2:p:110-116. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Editorial Secretary)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.