The Uncertain Trend in U.S. GDP

Charles Nelson and Christian Murray
Additional contact information
Christian Murray: University of Washington

Computational Economics from University Library of Munich, Germany

Abstract: Several recent papers conclude that U.S. real GDP is trend stationary, implying that all shocks are transitory and long run path is deterministic. These inferences fail to take into account two problems: the distortion of test size in finite samples due to data-based model selection, and the fragility of unit root tests in the face of plausible departures from the maintained hypothesis of temporal homogeneity. Indeed, additive outliers that alter the level of output for only one period reliably trigger false rejections of the unit root hypothesis when it is true and signal the presence of permanent shifts in trend that did not occur. Trend stationarity is not supported by the more homogeneous post-war data and if imposed would imply business cycles of implausble duration and pattern - the economy was 8% below the trend line in 1994

Keywords: business cycle; unit root tests; largest AR root; stochastic trend; deterministic trend (search for similar items in EconPapers)
JEL-codes: C22 E32 (search for similar items in EconPapers)
Pages: 28 pages
Date: 1997-02-19
New Economics Papers: this item is included in nep-dge and nep-ets
Note: Type of Document - postscript; prepared on macintosh; to print on PostScript; pages: 28 ; figures: request from author
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/comp/papers/9702/9702001.pdf (application/pdf)
https://econwpa.ub.uni-muenchen.de/econ-wp/comp/papers/9702/9702001.ps.gz (application/postscript)

Related works:
Journal Article: The uncertain trend in U.S. GDP (2000)
Working Paper: The Uncertain Trend in U.S. GDP (1998)
Working Paper: The Uncertain Trend in U.S. GDP (1998)
Working Paper: The Uncertain Trend in U.S. GDP (1997)
Working Paper: The Uncertain Trend in U.S. GDP (1997)
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:wpa:wuwpco:9702001

Access Statistics for this paper

More papers in Computational Economics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).