More uncertainty: on the trending nature of real GDP in the US and UK

Steven Cook

Applied Economics Letters, 2008, vol. 15, issue 9, 667-670

Abstract: While there is disagreement concerning the integrated nature of US Gross domestic product (GDP) over the long-run, there is a consensus that it is best characterized as I(1) over the post-World War II period. In this article the existing literature is extended via the use of an exponential smooth transition autoregressive (ESTAR)-based unit root test. It is shown that in contrast to the conventionally applied ADF test and the more powerful GLS-based ADF test, introduction of an alternative hypothesis of ESTAR adjustment results in the overwhelming rejection of the presence of a unit root. Similar results are presented for UK GDP over the same period.

Date: 2008
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DOI: 10.1080/13504850600722039

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