TY - JOUR
AU - Campbell,John Y.
AU - Perron,Pierre
TI - Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots
JF - National Bureau of Economic Research Technical Working Paper Series
VL - No. 100
PY - 1991
Y2 - April 1991
DO - 10.3386/t0100
UR - http://www.nber.org/papers/t0100
L1 - http://www.nber.org/papers/t0100.pdf
N1 - Author contact info:
John Y. Campbell
Morton L. and Carole S.
Olshan Professor of Economics
Department of Economics
Harvard University
Littauer Center 213
Cambridge, MA 02138
Tel: 617/496-6448
Fax: 617/495-7730
E-Mail: john_campbell@harvard.edu
Pierre Perron
Department of Economics
Boston University
270 Bay State Road
Boston, MA 02215
E-Mail: perron@bu.edu
M1 - published as John Y. Campbell, Pierre Perron. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," in Olivier Jean Blanchard and Stanley Fischer, editors, "NBER Macroeconomics Annual 1991, Volume 6" MIT Press (1991)
AB - This paper is an introduction to unit root econometrics as applied in macroeconomics. The paper first discusses univariate time series analysis, emphasizing the following topics: alternative representations of unit root processes, unit root testing procedures, the power of unit root tests, and the interpretation of unit root econometrics in finite samples. A second part of the paper tackles similar issues in a multivariate context where cointegration is now the central concept. The paper reviews representation, testing, and estimation of multivariate time series models with some unit roots. Two important themes of this paper are first, the importance of correctly specifying deterministic components of the series; and second, the usefulness of unit root tests not as methods to uncover some -true relation" but as practical devices that can be used to impose reasonable restrictions on the data and to suggest what asymptotic distribution theory gives the best approximation to the finite-sample distribution of coefficient estimates and test statistics.
ER -