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Trend Break or Unit Root in GDP of Iran

Hosein Abbasinejad, Hamid Abrishami and Hosein Kavand
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Hosein Abbasinejad: Corresponding Author, Associate Professor, University of Tehran-Iran
Hamid Abrishami: Professor, University of Tehran-Iran
Hosein Kavand: PhD student, researcher of Statistical Research and Training Center

Iranian Economic Review (IER), 2007, vol. 12, issue 1, 1-26

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 1970s (1350s) and 1980s (1360s) gross domestic product (contained oil) data of Iran. This article shows that the statistical evidence does not warrant abandoning the no-trend-break null hypothesis at the 5% significance level. 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 data is chosen based on pretest examination of the data.

Keywords: Bootstrap; Difference stationary; Trend; Trend stationary; Unit root (search for similar items in EconPapers)
Date: 2007
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