The Mysteries of Trend

Peter Phillips

No 1771, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Trends are ubiquitous in economic discourse, play a role in much economic theory, and have been intensively studied in econometrics over the last three decades. Yet the empirical economist, forecaster, and policy maker have little guidance from theory about the source and nature of trend behavior, even less guidance about practical formulations, and are heavily reliant on a limited class of stochastic trend, deterministic drift, and structural break models to use in applications. A vast econometric literature has emerged but the nature of trend remains elusive. In spite of being the dominant characteristic in much economic data, having a role in policy assessment that is often vital, and attracting intense academic and popular interest that extends well beyond the subject of economics, trends are little understood. This essay discusses some implications of these limitations, mentions some research opportunities, and briefly illustrates the extent of the difficulties in learning about trend phenomena even when the time series are far longer than those that are available in economics.

Keywords: Climate change; Etymology of trend; Paleoclimatology; Policy; Stochastic trend (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2010-09
New Economics Papers: this item is included in nep-ecm, nep-ene, nep-ets, nep-hpe and nep-mic
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Citations: View citations in EconPapers (9)

Published in Macroeconomic Review (October 2010), Special Feature C, 82-89

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