Searching for a Break in GNP

Lawrence Christiano

Journal of Business & Economic Statistics, 1992, vol. 10, issue 3, 237-50

Abstract: It has been suggested that existing estimates of the long-run impact of a surprise move in income may have a substantial upward bias due to the presence of a trend break in postwar U.S. gross national product data. This article shows that the statistical evidence does not warrant abandoning the no-trend-break null hypothesis. A key part of the argument is that conventionally computed p values overstate the likelihood of the trend-break alternative hypothesis. This is because they do not take into account that, in practice, the date is chosen based on pretest examination of the data.

Date: 1992
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Working Paper: Searching For a Break in GNP (1988)
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