## Siyaset Bilimi ve Kamu Yönetimi Bölümü hakkinda How Important Are Structural Changes As An Explanation Of Unit Roots In Macroeconomic Time Series? ile ilgili bilgiler

*How Important Are Structural Changes As An Explanation Of Unit Roots In Macroeconomic Time Series? Some Counter Evidence From G-7 Countries In recent years there has been an increased concern*

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How Important Are Structural Changes As An Explanation Of Unit Roots In Macroeconomic Time Series? How Important Are Structural Changes As An Explanation Of Unit Roots In Macroeconomic Time Series? Some Counter Evidence From G-7 Countries In recent years there has been an increased concern about the effects of structural changes on the results obtained from the Dickey-Fuller unit root tests. Theoretically structural changes can cause artificial unit roots. Empirical validity of this result is, however, seen to be suspicious. Some studies claimed that the Dickey-Fuller tests reject the null hypothesis of a unit root, if a correction is made for the effects of structural changes. This study takes a different approach to examine the empirical validity of structural change effect. The study uses a split sample approach and applies some unit root tests with good power properties to the parts of sample that are believed to be not containing structural changes. Using several macroeconomic time series data from five G-7 countries, the study finds that subsamples of the data also contain unit roots. This result calls into question the structural change explanation of the presence of unit roots in most macroeconomic time series. business-mix-(11).jpg 1. INTRODUCTION Over the last decade, a great deal of literature has accumulated on the issue of unit roots in macroeconomic time series. Nelson and Plosser (1982) found that most of the US macroeconomic time series has a unit root, hence, is difference stationary (DS), or integrated of order one, 7(1), rather than trend stationary (TS), or integrated of order zero, 7(0), using the method developed in Dickey (1976), Fuller (1976), and Dickey and Fuller (1979, 1981) to test for unit roots. Time series that contain an autoregressive unit root are traditionally called nonstationary. Findings of Nelson and Plosser (1982) have been confirmed by other researchers over the years. However, the nonstationarity of the US real GNP series brought into question and there seems to be an opposite view developing about this series (see, for instance, Campbell and Mankiw (1987) and McCallum (1993)). In the following years after the publication of a series of papers by Dickey and Fuller, some new tests have been developed and some modifications and extensions have been suggested to the Dickey-Fuller unit root tests. These include Evans and Savin (1981, 1984), Sargan and Bahargava (1983), Said and Dickey (1984), Bahargava (1986), Dickey and Pantula (1987), Phillips (1987a), Phillips and Perron (1988), Perron (1989), Dufour and King (1991), Hall (1992), Kwiatkowski, Phillips, Schmidt, and Shin (1992), Elliot, Rothenberg, and Stock (1992), Schmidt and Phillips (1992), and Saikkonen and Luukkonen (1993) among many others. Unit roots in macroeconomic time series has very different implications for the statistical analysis of these series and economic theorizing than a TS class macroeconomic time series. Engle and Granger (1987) showed a number of statistical properties specific to 7(1) series. The most important difference between 7(0) and 7(1) time series in terms of the statistical properties they possess is that the moments of the 7(1) series are time dependent while the moments of the 7(0) series are time invariant. To show that, let xt be a random walk without drift, then, it can easily be verified that for a fixed starting value x0, xt has the representation xt = x0 + ^ ei with E(e2) = of and var(xt) = to2, where et is a white noise. It is clear that the variance of a nonstationary time series will grow linearly with time. This is in sharp contrast with stationary time series whose moments are time invariant. Mehmet BALCILARAssistant Professor, Department of Economics, Çukurova University, Faculty of Economics and Administrative Sciences, Adana
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explanation, important, macroeconomic, roots, series?, structural, time, unit |

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