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The Unit Root Hypothesis in Long-term Output: Evidence from Two Structural Breaks for 16 Countries

Author

Listed:
  • Ben-David, Dan
  • Lumsdaine, Robin L
  • Papell, David

Abstract

Recent literature has documented the sensitivity of unit root tests to failure to account for structural change. This paper reconsiders international evidence on the unit root hypothesis while allowing for two structural breaks. We find evidence of two breaks in three-quarters of the data, rejecting the unit root hypothesis in 50% more cases than models that allow for only one structural break. Most of the trend breaks are associated with a change in output levels. As the neo-classical growth model predicts, the magnitude of these level changes is shown here to be related to changes in growth rates during the period following the break.

Suggested Citation

  • Ben-David, Dan & Lumsdaine, Robin L & Papell, David, 1996. "The Unit Root Hypothesis in Long-term Output: Evidence from Two Structural Breaks for 16 Countries," CEPR Discussion Papers 1336, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1336
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    Citations

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    Cited by:

    1. Joseph P. Byrne & Roger Perman, 2006. "Unit Roots and Structural Breaks: A Survey of the Literature," Working Papers 2006_10, Business School - Economics, University of Glasgow.
    2. Pedersen, Torben Mark & Elmer, Anne Marie, 2003. "International evidence on the connection between business cycles and economic growth," Journal of Macroeconomics, Elsevier, vol. 25(2), pages 255-275, June.
    3. Chan, Tze-Haw & Chong, Lee Lee & Khong, Wye Leong Roy, 2008. "Real Exchange Rate Behavior: New Evidence with Linear and Non-linear Endogenous Break(s)," MPRA Paper 3406, University Library of Munich, Germany.
    4. Franco Bevilacqua & Adriaan van Zon, 2004. "Random walks and non-linear paths in macroeconomic time series: some evidence and implications," Chapters, in: John Foster & Werner Hölzl (ed.), Applied Evolutionary Economics and Complex Systems, chapter 3, Edward Elgar Publishing.
    5. Hossain, Mohammad & Tisdell, Clement A., 2003. "Fertility and Female Work Force Participation in Bangladesh: Causality and Cointegration," Social Economics, Policy and Development Working Papers 106947, University of Queensland, School of Economics.

    More about this item

    Keywords

    unit root hypothesis; trend breaks; growth;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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