The Unit Root Hypothesis in Long-term Output: Evidence from Two Structural Breaks for 16 Countries

Dan Ben-David (), Robin L Lumsdaine and David Papell

No 1336, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Recent literature has documented the sensitivity of unit root tests to failure to account for structural change. This paper reconsiders international evidence on the unit root hypothesis while allowing for two structural breaks. We find evidence of two breaks in three-quarters of the data, rejecting the unit root hypothesis in 50% more cases than models that allow for only one structural break. Most of the trend breaks are associated with a change in output levels. As the neo-classical growth model predicts, the magnitude of these level changes is shown here to be related to changes in growth rates during the period following the break.

Keywords: unit root hypothesis; trend breaks; growth (search for similar items in EconPapers)
JEL-codes: C22 O1 O47 O5 (search for similar items in EconPapers)
Date: 1996-02
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Citations: View citations in EconPapers (5)

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