Abstract
The theme of unit roots in macroeconomic time series has received a great amount of theoretical and applied research in the last two decades. This paper presents some of the main issues regarding unit root tests, explores some of the implications for macroeconomic theory and policy, and reviews the recent evidence on the presence of unit roots in GDP series for Latin American countries. We conclude that a consensual view on many of the aspects involved has not emerged from this literature.
Highlights
It has been two decades since the influential work by Nelson and Plosser (1982) on the existence of unit roots in macroeconomic time series was published
This paper presents some of the main issues regarding unit root tests, explores some of the implications for macroeconomic theory and policy, and reviews the recent evidence on the presence of unit roots in GDP series for Latin American countries
Rapach suggests that the results presented should be expanded by allowing for structural breaks in the series along the lines of Perron (1989) and others, since there is evidence that the null of unit roots is more frequently rejected when structural breaks are allowed in the deterministic trend
Summary
It has been two decades since the influential work by Nelson and Plosser (1982) on the existence of unit roots in macroeconomic time series was published. Perron (1989) applies the same test using quarterly postwar real GNP series for the US economy (1947:1 to 1986: III), and includes a one-time change in the slope of the deterministic trend in 1973 due to the oil price shock.
Sign-in/Register to view highlights & summary 
Published Version (
Free)
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call