Kejriwal, Mohitosh and Lopez, Claude (2010): Unit Roots, Level Shifts and Trend Breaks in Per Capita Output: A Robust Evaluation.
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Determining whether per capita output can be characterized by a stochastic trend is complicated by the fact that infrequent breaks in trend can bias standard unit root tests towards non-rejection of the unit root hypothesis. The bulk of the existing literature has focused on the application of unit root tests allowing for structural breaks in the trend function under the trend stationary alternative but not under the unit root null. These tests, however, provide little information regarding the existence and number of trend breaks. Moreover, these tests su¤er from serious power and size distortions due to the asymmetric treatment of breaks under the null and alternative hypotheses. This paper estimates the number of breaks in trend employing procedures that are robust to the unit root/stationarity properties of the data. Our analysis of the per-capita GDP for OECD countries thereby permits a robust classi�cation of countries according to the "growth shift", "level shift" and "linear trend" hypotheses. In contrast to the extant literature, unit root tests conditional on the presence or absence of breaks do not provide evidence against the unit root hypothesis.
|Item Type:||MPRA Paper|
|Original Title:||Unit Roots, Level Shifts and Trend Breaks in Per Capita Output: A Robust Evaluation|
|Keywords:||growth shift, level shift, structural change, trend breaks, unit root|
|Subjects:||E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
|Depositing User:||Claude Lopez|
|Date Deposited:||20. Sep 2010 16:35|
|Last Modified:||12. Feb 2013 10:12|
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