Unit Roots in Real GNP: Do We Know, and Do We Care? / Lawrence J. Christiano, Martin Eichenbaum.

Format:

Book

Author/Creator:

Christiano, Lawrence J.

Contributor:

National Bureau of Economic Research.

Eichenbaum, Martin.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3130.

NBER working paper series no. w3130

Language:

English

Subjects (All):

Gross national product.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Unit Roots in Real GNP

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1989.

Cambridge, Mass : National Bureau of Economic Research, 1989.

Summary:

No, and maybe not. [additional text from author's introduction] To us, the possibility of providing a compelling case that real GMP is either trend or difference stationary seems extremely small, certainly on the basis of post-war data. This is because there is only one difference between these two types of processes and that difference is completely summarized by the answer to the question. How much should an innovation to real GMP affect the optimal forecast of real GMP into the infinite future? If the answer is zero, then real GMP is trend stationary. If the answer is not zero, then real GMP is difference stationary. The competing hypotheses have no other testable differences. Once we pose the question in this way, it seems clear that economists ought to be extremely skeptical of any argument that purports to support one view or the other. Simply put, it's hard to believe that a mere 40 years of data contain any evidence on the only experiment that is relevant.

Notes:

Print version record

October 1989.