Further Investigation of the Uncertain Unit Root in GNP

Yin-Wong Cheung, Menzie D. Chinn

NBER Technical Working Paper No. 206*
Issued in November 1996
NBER Program(s):   IFM

---- Abstract -----

A more powerful version of the ADF test and a test that has trend stationarity as the null are applied to U.S. GNP. Simulated critical values generated from plausible trend and difference stationary models are used in order to minimize possible finite sample biases. The discriminatory power of the two tests is evaluated using alternative-specific rejection frequencies. For post-War quarterly data, these two tests do not provide a definite conclusion. However, when analyzing annual data over the 1869-1986 period, the unit root null is rejected, while the trend stationary null is not.

*Published: Journal of Business and Economic Statistics, Vol. 15, no. 1 (January 1997): 68-73.

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