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Unit root tests with smooth breaks: an application to the Nelson-Plosser data set

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  • Razvan Pascalau

Abstract

This article reconsiders the nature of the trends (i.e. deterministic or stochastic) of the Nelson-Plosser macroeconomic time series. For this purpose, the article employs two new tests that display robustness to structural breaks of unknown forms, irrespective of the date and/or location of the breaks. These tests approximate structural changes as smooth processes via flexible Fourier transforms. In general, it appears that real variables are stationary while nominal ones have a unit root.

Suggested Citation

  • Razvan Pascalau, 2010. "Unit root tests with smooth breaks: an application to the Nelson-Plosser data set," Applied Economics Letters, Taylor & Francis Journals, vol. 17(6), pages 565-570.
    • Handle: RePEc:taf:apeclt:v:17:y:2010:i:6:p:565-570
    DOI: 10.1080/13504850802112245
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    More about this item

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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