The methodological problem of unit roots: stationarity and its consequences in the context of the Tinbergen debate

Muhammad Ali Nasir () and Jamie Morgan
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Muhammad Ali Nasir: University of Leeds
Jamie Morgan: Leeds Beckett University

Annals of Operations Research, 2025, vol. 347, issue 1, No 6, 113-130

Abstract: Abstract In this paper we highlight an important yet often neglected issue that arises within the context of the broader set of concerns set out in Keynes’s seminal critique of Tinbergen’s early work in econometrics and that is the problem of “trend” in the dataset. We use the example of conforming data to achieve stationarity to solve a problem of unit roots to highlight that Keynes concerns with the “logical issues” regarding the “conditions which the economic material must satisfy” still gains little attention in theory and practice. There is a lot more discussion of the technical aspects of method than there is reflection on conditions that must be satisfied when methods are applied. Concomitantly, there is a tendency to respond to problems of method by applying fixes rather than addressing the underlying problem. We illustrate various facets of the argument using central bank policy targeting and using examples of differencing, co-integration and Bayesian applications.

Keywords: Tinbergen debate; Research methods; Causal inference; Policy targeting (search for similar items in EconPapers)
JEL-codes: B16 B23 B41 C11 C18 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10479-023-05172-1

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