Is Per Capita Real GDP Stationary in Central and Eastern European Countries?
In this study we apply flexible Fourier stationarity unit root testing as proposed by Enders and Lee (2004, 2009) to assess the nonstationary properties of per capita real gross domestic product (GDP) for nine central and east European (CEE) countries. We find that the Fourier stationary unit root test has greater power than the linear method if the true data-generating process of per capita real GDP is in fact a stationary nonlinear process of an unknown form with structural change using low-frequency components. We investigate the stationarity of per capita real GDP from the nonlinear point of view and provide robust evidence clearly indicating that real output is well characterized by a nonlinear, mean-reverting process for three countries, namely, Bulgaria, Latvia, and Romania. These results have important policy implications for CEE countries.
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Volume (Year): 49 (2011)
Issue (Month): 3 (May)
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