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How sensitive are trends to data definitions? Results for East Asian and G5 countries

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  • Yin-Wong Cheung
  • Menzie David Chinn
  • Tuan Tran

Abstract

This paper examines whether test results characterizing per capita output as either trend or difference stationary are sensitive to whether output is valued in domestic currency terms, or in some international numeraire, such as the Summers-Heston international dollar. Using the conventional ADF test, and the Kwiatkowsi et al. test with a trend stationary null, we find that for economies such as those of the East Asian countries, the best description of the persistence of the data does depend upon the valuation of output. No such discrepancy is found for the output series of the G5 countries. We conclude that researchers should be extremely cautious about making generalizations regarding the time-series properties of output.

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  • Yin-Wong Cheung & Menzie David Chinn & Tuan Tran, 1995. "How sensitive are trends to data definitions? Results for East Asian and G5 countries," Applied Economics Letters, Taylor & Francis Journals, vol. 2(1), pages 1-6.
    • Handle: RePEc:taf:apeclt:v:2:y:1995:i:1:p:1-6
    DOI: 10.1080/135048595357708
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    1. Shiller, Robert J. & Perron, Pierre, 1985. "Testing the random walk hypothesis : Power versus frequency of observation," Economics Letters, Elsevier, vol. 18(4), pages 381-386.
    2. Paul M. Romer, 1990. "Capital, Labor, and Productivity," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990 Micr), pages 337-367.
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    Cited by:

    1. Kristian Jönsson, 2011. "Testing Stationarity in Small‐ and Medium‐Sized Samples when Disturbances are Serially Correlated," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(5), pages 669-690, October.

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