Determination of stochastic vs. deterministic trend in quarterly GDP of Pakistan
Zahid Khan and
Zahid Asghar ()
MPRA Paper from University Library of Munich, Germany
Many economic and financial time series show evidence of trending behavior or non stationarity in the mean. An important econometric goal is determining the most proper form of the trend in the data. The transformations of series depend on whether the series is trend stationary or difference stationary. In this paper, study is conducted to declare the nature of trend component in quarterly GDP of Pakistan whether it is trend stationary or difference stationary. It is necessary to know, because trend stationary and difference stationary models imply very different short run and long run dynamics. We have explored the type of trend in GDP series by ADF unit root test and also support our arguments by empirical distribution instead of asymptotical ones i.e., bootstrapping test. The purpose of the paper is not only to investigate the type of trend in the series by conventional methods but also to motivate small distribution theory like bootstrapping techniques that can helps ones in selection of advocate model for observed series.
Keywords: Bootstrapping; Stationarity; Pivotal statistic; Unit root (search for similar items in EconPapers)
JEL-codes: C01 C12 C15 (search for similar items in EconPapers)
Date: 2009-12-22, Revised 2010-04-10
New Economics Papers: this item is included in nep-cwa and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:22091
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