NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Abdelhak S. Senhadji

International Monetary Fund
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Washington, DC 20431

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NBER Working Papers and Publications

March 1996Deterministic vs. Stochastic Trend in U.S. GNP, Yet Again
with Francis X. Diebold: w5481
A sleepy consensus has emerged that U.S. GNP data are uninformative as to whether trend is better described as deterministic or stochastic. Although the distinction is not critical in some contexts, it is important for point forecasting, because the two models imply very different long-run dynamics and hence different long-run forecasts. We argue that, even for the famously recalcitrant GNP series, unit root tests over long spans can be informative. Our results make clear that uncritical repetition of the `we don't know, and we don't care' mantra is just as scientifically irresponsible as blind adoption of the view that `all macroeconomic series are difference-stationary,' or the view that `all macroeconomic series are trend-stationary.' There is simply no substitute for serious, case-...

Published: American Economic Review, 86, 1291-1298 (1996).

 
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