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Characterising the South African business cycle: is GDP difference-stationary or trend-stationary in a Markov-switching setup? - Il ciclo economico del Sud Africa: il PIL è stazion ario alle differenze o stazionario nel trend in un modello Markov-switching?

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We test for a unit root in de-trended GDP in a two- state Markov switching specification using a modified Augmented Dickey-Fuller test. Our results show that a first difference GDP specification is preferred over the de-trended spec ification. In addition, the null of difference- stationary GDP cannot be rejected. By implication, shocks to GDP are permanent which validates specifying trend GDP with a stochastic co mponent – something that is inherently assumed in a number of research papers that estimat e potential GDP growth and that model GDP in general equilibrium specifications. - In questo studio si effettua un test a radice unita ria sul PIL ‘detrendizzato’ in un modello Markov-switching a due paesi, utilizzando il test a ugumented Dickey-Fuller. I risultati mostrano che una specificazione alle differenze prime del PI L è preferibile alla specificazione detrendizzata. Inoltre l’ipotesi nulla di GDP stazi onario alle differenze non può essere rigettata. Gli effetti degli shock al PIL risultano permanenti e ciò convalida la specificazione del trend con una componente stocastica – così come assunto in u n ampio numero di lavori di ricerca.

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  • Balcilar, Mehmet & Gupta, Rangan & Jooste, Charl & Ranjbar, Omid, 2016. "Characterising the South African business cycle: is GDP difference-stationary or trend-stationary in a Markov-switching setup? - Il ciclo economico del Sud Africa: il PIL è stazion ario alle differenz," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 69(1), pages 33-44.
    • Handle: RePEc:ris:ecoint:0771
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    9. Hall, Stephen G & Psaradakis, Zacharias & Sola, Martin, 1999. "Detecting Periodically Collapsing Bubbles: A Markov-Switching Unit Root Test," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(2), pages 143-154, March-Apr.
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    More about this item

    Keywords

    Markov-Switching; Difference-Stationary; Trend-Stationary;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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