Testing For Unit Roots Using Economics

Romulo Chumacero

No 2, Computing in Economics and Finance 2001 from Society for Computational Economics

Abstract: This paper considers the economic implications of having unit roots in stochastic processes of variables like consumption or GDP. Using a variety of models, we develop indirect tests for unit roots based on sharp distinctions that should arise when the scale variable is either difference stationary or trend stationary. These tests are seen to avoid the undesirable size-power trade-off that characterizes traditional UR tests. They are applied to a wide variety of countries.

Keywords: Unit Root; Trend; General Equilibrium; Interest Rates. (search for similar items in EconPapers)
JEL-codes: C12 C15 E43 (search for similar items in EconPapers)
Date: 2001-04-01
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (4)

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