Testing for a Deterministic Trend when there is Evidence of Unit-Root
Manuel Gómez-Zaldívar and
Daniel Ventosa-Santaulària
No EM200801, Department of Economics and Finance Working Papers from Universidad de Guanajuato, Department of Economics and Finance
Abstract:
Whilst the existence of a unit root implies that current shocks have permanent effects, in the long run, the simultaneous presence of a deterministic trend obliterates that consequence. As such, the long-run level of macroeconomic series depends upon the existence of a deterministic trend. This paper proposes a formal statistical procedure to distinguish between the null hypothesis of unit root and that of unit root with drift. Our procedure is asymptotically robust with regard to autocorrelation and takes into account a potential single structural break. Empirical results show that most of the macroeconomic time series originally analyzed by Nelson and Plosser (1982) are characterized by their containing both a deterministic and a stochastic trend.
Keywords: Unit Root; Deterministic Trend; Trend Regression; R2 (search for similar items in EconPapers)
JEL-codes: C12 C13 C22 E30 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2008-02, Revised 2010-06
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
http://economia.ugto.org/WorkingPapers/EM200801.pdf Revised version, 2010 (application/pdf)
Related works:
Journal Article: Testing for a Deterministic Trend When There is Evidence of Unit Root (2011) 
Working Paper: Testing for a Deterministic Trend when there is Evidence of Unit-Root (2010) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:gua:wpaper:em200801
Access Statistics for this paper
More papers in Department of Economics and Finance Working Papers from Universidad de Guanajuato, Department of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Luis Sanchez Mier ( this e-mail address is bad, please contact ).