Further investigation of the uncertain unit root in GNP
This paper adopts a different approach to the study of the persistence of U.S. GNP. First, this paper uses a more powerful version of the ADF test developed by Elliot, Rothenberg and Stock (1992). Second, we also examine the results from a unit root test that has trend stationarity as the null (Kwiatkowski et al., 1992). Third, simulated critical values generated from plausible trend stationary and difference stationary models for GNP data are used, in order to minimize the possible biases induced by nuisance parameters in finite samples. The ability of these two tests to discriminate against plausible alternatives is evaluated using alternative-specific rejection frequencies. Fourth, to evaluate the implication of extending the time span of the data on the ability to make clear inferences regarding the presence of unit roots, we examine both post-war quarterly data and a longer annual series spanning the period 1869 to 1986. For quarterly data, these two unit root tests do not provide a definite conclusion regarding the existence of a unit root in GNP data, thereby confirming Rudebusch's (1993) results. In contrast, when analyzing annual data over the 1869-1986 period, we obtain very sharp results: The unit root null is rejected, while the trend stationary null is not. Moreover, the alternative-specific power for the trend stationary null test is fairly high. We conclude that with a longer span of data, one can obtain strong evidence of trend stationarity in per capita GNP.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lawrence J. Christiano & Martin Eichenbaum, 1989.
"Unit Roots in Real GNP: Do We Know, and Do We Care?,"
NBER Working Papers
3130, National Bureau of Economic Research, Inc.
- Christiano, Lawrence J. & Eichenbaum, Martin, 1990. "Unit roots in real GNP: Do we know, and do we care?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 7-61, January.
- Lawrence J. Christiano & Martin Eichenbaum, 1990. "Unit roots in real GNP: do we know, and do we care?," Working Paper Series, Macroeconomic Issues 90-2, Federal Reserve Bank of Chicago.
- Lawrence J. Christiano & Martin Eichenbaum, 1989. "Unit roots in real GNP: do we know, and do we care?," Discussion Paper / Institute for Empirical Macroeconomics 18, Federal Reserve Bank of Minneapolis.
- Perron, P. & Phillips, P.C.B., 1986.
"Does Gnp Have a Unit Root? a Reevaluation,"
Cahiers de recherche
8640, Universite de Montreal, Departement de sciences economiques.
- Hall, Alastair R, 1994. "Testing for a Unit Root in Time Series with Pretest Data-Based Model Selection," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 461-70, October.
- Cheung, Yin-Wong & Chinn, Menzie David, 1996.
"Deterministic, Stochastic, and Segmented Trends in Aggregate Output: A Cross-Country Analysis,"
Oxford Economic Papers,
Oxford University Press, vol. 48(1), pages 134-62, January.
- Yin-Wong Cheung & Menzie Chinn, 1995. "Deterministic, stochastic and segmented trends in aggregate output: A cross-country analysis," Macroeconomics 9508005, EconWPA.
- Perron,P., 1988. "Testing For A Random Walk: A Simulation Experiment Of Power When The Simpling Interval Is Varied," Papers 336, Princeton, Department of Economics - Econometric Research Program.
- Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990.
"Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?,"
8905, Michigan State - Econometrics and Economic Theory.
- Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
- Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
- Glenn D. Rudebusch, 1990.
"Trends and random walks in macroeconomic time series: a re-examination,"
Finance and Economics Discussion Series
139, Board of Governors of the Federal Reserve System (U.S.).
- Rudebusch, Glenn D, 1992. "Trends and Random Walks in Macroeconomic Time Series: A Re-examination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(3), pages 661-80, August.
- Pierre Perron & Robert J. Shiller, 1984.
"Testing the Random Walk Hypothesis: Power Versus Frequency of Observation,"
Cowles Foundation Discussion Papers
732, Cowles Foundation for Research in Economics, Yale University.
- 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.
- Robert J. Shiller & Pierre Perron, 1985. "Testing the Random Walk Hypothesis: Power versus Frequency of Observation," NBER Technical Working Papers 0045, National Bureau of Economic Research, Inc.
- Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992.
"Efficient Tests for an Autoregressive Unit Root,"
NBER Technical Working Papers
0130, National Bureau of Economic Research, Inc.
- Rudebusch, Glenn D, 1993.
"The Uncertain Unit Root in Real GNP,"
American Economic Review,
American Economic Association, vol. 83(1), pages 264-72, March.
- DeJong, David N, et al, 1992. "Integration versus Trend Stationarity in Time Series," Econometrica, Econometric Society, vol. 60(2), pages 423-33, March.
- Anindya Banerjee & Robin L. Lumsdaine & James H. Stock, 1990.
"Recursive and Sequential Tests of the Unit Root and Trend Break Hypothesis: Theory and International Evidence,"
NBER Working Papers
3510, National Bureau of Economic Research, Inc.
- Banerjee, Anindya & Lumsdaine, Robin L & Stock, James H, 1992. "Recursive and Sequential Tests of the Unit-Root and Trend-Break Hypotheses: Theory and International Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 271-87, July.
- Stock, James H., 1991.
"Confidence intervals for the largest autoregressive root in U.S. macroeconomic time series,"
Journal of Monetary Economics,
Elsevier, vol. 28(3), pages 435-459, December.
- James H. Stock, 1991. "Confidence Intervals for the Largest Autoresgressive Root in U.S. Macroeconomic Time Series," NBER Technical Working Papers 0105, National Bureau of Economic Research, Inc.
- John Y. Campbell & N. Gregory Mankiw, 1986.
"Are Output Fluctuations Transitory?,"
NBER Working Papers
1916, National Bureau of Economic Research, Inc.
- Cheung, Yin-Wong & Lai, Kon S, 1995. "Lag Order and Critical Values of a Modified Dickey-Fuller Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(3), pages 411-19, August.
- Balke, Nathan S & Gordon, Robert J, 1989. "The Estimation of Prewar Gross National Product: Methodology and New Evidence," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 38-92, February.
- Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
- Stock, James H. & Watson, Mark W., 1986. "Does GNP have a unit root?," Economics Letters, Elsevier, vol. 22(2-3), pages 147-151.
- Leybourne, S J & McCabe, B P M, 1994. "A Consistent Test for a Unit Root," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(2), pages 157-66, April.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpem:9508002. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.