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Unit Roots in Macroeconomic Time Series: Some Critical Issues

  • Bennett T. McCallum

This paper suggests that the relevant question concerning unit root' in the U.S. real GNP time series pertains to the relative importance of difference-stationary and trend-stationary components. Various analytical approaches indicate than an accurate answer is not obtainable with existing data. The paper next considers whether trending series should be differences prior to use in regression analysis and suggests it may not matter greatly if autocorrelated residuals are avoided. Finally, the paper argues that the absence of cointegration among variables does not imply the absence of any practically useful long-run relationship.

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File URL: http://www.nber.org/papers/w4368.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4368.

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Date of creation: May 1993
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Publication status: published as Economic Quarterly, Federal Reserve Bank of Richmond, Vol. 79, No. 2, pp. 13-44, (Spring 1993).
Handle: RePEc:nbr:nberwo:4368
Note: EFG ME
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