EconPapers    
Economics at your fingertips  
 

Characterising the South African Business Cycle: Is GDP Difference-Stationary or Trend-Stationary in a Markov-Switching Setup?

Mehmet Balcilar (), Rangan Gupta (), Charl Jooste () and Omid Ranjbar ()

No 15-04, Working Papers from Eastern Mediterranean University, Department of Economics

Abstract: We test for a unit root in de-trended GDP in a two-state Markov switching specification using a modified Augmented Dickey-Fuller test. Our results show that a first difference GDP specification is preferred over the de-trended specification. In addition, the null of difference-stationary GDP cannot be rejected. By implication, shocks to GDP are permanent which validates specifying trend GDP with a stochastic component -something that is inherently assumed in a number of research papers that estimate potential GDP growth and that model GDP in general equilibrium specifications.

Keywords: Markov-switching; difference-stationary; trend-stationary (search for similar items in EconPapers)
JEL-codes: C22 C25 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-ger and nep-mac
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://repec.economics.emu.edu.tr/RePEc/emu/wpaper/15-03.pdf First version, 2015 (application/pdf)

Related works:
Working Paper: Characterising the South African Business Cycle: Is GDP Difference-Stationary or Trend-Stationary in a Markov-Switching Setup? (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:emu:wpaper:15-04.pdf

Access Statistics for this paper

More papers in Working Papers from Eastern Mediterranean University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Mehmet Balcilar ().

 
Page updated 2019-08-20
Handle: RePEc:emu:wpaper:15-04.pdf