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The nonstationarity of the consumption-income ratio: Evidence from more powerful Dickey-Fuller tests

  • Steven Cook
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    In this letter the question of whether the consumption-income ratio is mean reverting is revisited. To address known problems of low power associated with previous studies, more powerful modifications of the Dickey-Fuller (DF) test are applied. The results of weighted symmetric and recursively mean-adjusted DF tests provide strong evidence of the UK consumption-income ratio being nonstationary. This finding is further supported by reduced bias estimation of the autoregressive parameter, the estimated value of ρ derived being much closer to unity than that obtained under a conventional DF test.

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    Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

    Volume (Year): 10 (2003)
    Issue (Month): 7 ()
    Pages: 393-395

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    Handle: RePEc:taf:apeclt:v:10:y:2003:i:7:p:393-395
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