2016, Volume 69 - Issue 1
RSS feed citation: at CitEc
Publication date: 23 February 2016
EFFECT OF RECENT U.S. MONETARY POLICY ON THE BALANCE OF TRADE.Read the article
CAN DEBT CEILING AND GOVERNMENT SHUTDOWN PREDICT US REAL STOCK RETURNS? A BOOSTRAP ROLLING WINDOW APPROACHRead the article
CHARACTERISING THE SOUTH AFRICA BUSINESS CYCLE: IS GDP DIFFERENCE-STATIONARY OR TREND-STATIONARY IN A MARKOV-SWITCHING SETUP?Read the article
Mehmet BALCILAR, Department of Economics, Eastern Mediterranean University, Fa-magusta, Turkish Republic of Northern Cyprus, via Mersin 10, Turkey
Rangan GUPTA, Department of Economics, University of Pretoria, Pretoria, South Africa
Charl JOOSTE, Department of Economics, University of Pretoria, Pretoria, South Africa
Omid RANJBAR, Ministry of Industry, Mine and Trade, Tehran, Iran
We test for a unit root in de-trended GDP in a two-state Markov switching specification using a modified Augmented Dickey-Fuller test. Our results show that a first difference GDP specification is preferred over the de-trended specification. In addition, the null of differencestationary GDP cannot be rejected. By implication, shocks to GDP are permanent which validates specifying trend GDP with a stochastic component – something that is inherently assumed in a number of research papers that estimate potential GDP growth and that model GDP in general equilibrium specifications.
C22, C25, E32
Markov-Switching, Difference-Stationary, Trend-Stationary
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