Deterministic vs. Stochastic Trend in U.S. GNP, Yet Again / Francis X. Diebold, Abdelhak S. Senhadji.

Format:

Book

Author/Creator:

Diebold, Francis X.

Contributor:

National Bureau of Economic Research.

Senhadji, Abdelhak S.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5481.

NBER working paper series no. w5481

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1996.

Summary:

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- by-case analysis.

Notes:

Print version record

March 1996.