scholarly journals Unit roots in macroeconomic time series: theory, implications, and evidence

Nova Economia ◽  
2005 ◽  
Vol 15 (3) ◽  
pp. 145-176 ◽  
Author(s):  
Gilberto A. Libanio
Keyword(s):  
Time Series ◽  
Latin American ◽  
Unit Root ◽  
Applied Research ◽  
Unit Roots ◽  
Unit Root Tests ◽  
Macroeconomic Theory ◽  
Macroeconomic Time Series ◽  
Latin American Countries

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.

scholarly journals Spurious Regression

2009 ◽  
Vol 2009 ◽  
pp. 1-27 ◽  
Author(s):  
D. Ventosa-Santaulària
Keyword(s):  
Time Series ◽  
Unit Root ◽  
Long Memory ◽  
Unit Roots ◽  
Unit Root Tests ◽  
Modern Time ◽  
Spurious Regression ◽  
Time Series Econometrics ◽  
Wide Range ◽  
Applied Macroeconomics

The spurious regression phenomenon in least squares occurs for a wide range of data generating processes, such as driftless unit roots, unit roots with drift, long memory, trend and broken-trend stationarity. Indeed, spurious regressions have played a fundamental role in the building of modern time series econometrics and have revolutionized many of the procedures used in applied macroeconomics. Spin-offs from this research range from unit-root tests to cointegration and error-correction models. This paper provides an overview of results about spurious regression, pulled from disperse sources, and explains their implications.

The nature of Austrian macroeconomic time series unit root tests

Empirica ◽  
1990 ◽  
Vol 17 (2) ◽  
pp. 131-154
Author(s):  
Thomas Url ◽  
Gert Wehinger
Keyword(s):  
Time Series ◽  
Unit Root ◽  
Unit Root Tests ◽  
Macroeconomic Time Series

scholarly journals Unit Roots in Time Series with Changepoints

2017 ◽  
Vol 6 (6) ◽  
pp. 127
Author(s):  
Ed Herranz ◽  
James Gentle ◽  
George Wang
Keyword(s):  
Time Series ◽  
Unit Root ◽  
Null Hypothesis ◽  
Structural Changes ◽  
Linear Trend ◽  
Unit Root Test ◽  
Unit Roots ◽  
Cointegration Analysis ◽  
Unit Root Tests ◽  
Standard Unit

Many financial time series are nonstationary and are modeled as ARIMA processes; they are integrated processes (I(n)) which can be made stationary (I(0)) via differencing n times. I(1) processes have a unit root in the autoregressive polynomial. Using OLS with unit root processes often leads to spurious results; a cointegration analysis should be used instead. Unit root tests (URT) decrease spurious cointegration. The Augmented Dickey Fuller (ADF) URT fails to reject a false null hypothesis of a unit root under the presence of structural changes in intercept and/or linear trend. The Zivot and Andrews (ZA) (1992) URT was designed for unknown breaks, but not under the null hypothesis. Lee and Strazicich (2003) argued the ZA URT was biased towards stationarity with breaks and proposed a new URT with breaks in the null. When an ARMA(p,q) process with trend and/or drift that is to be tested for unit roots and has changepoints in trend and/or intercept two approaches that can be taken: One approach is to use a unit root test that is robust to changepoints. In this paper we consider two of these URT's, the Lee-Strazicich URT and the Hybrid Bai-Perron ZA URT(Herranz, 2016.)  The other approach we consider is to remove the deterministic components with changepoints using the Bai-Perron breakpoint detection method (1998, 2003), and then use a standard unit root test such as ADF in each segment. This approach does not assume that the entire time series being tested is all I(1) or I(0), as is the case with standard unit root tests. Performances of the tests were compared under various scenarios involving changepoints via simulation studies.  Another type of model for breaks, the Self-Exciting-Threshold-Autoregressive (SETAR) model is also discussed.

scholarly journals UNDERSTANDING INDONESIA’S MACROECONOMIC DATA: WHAT DO WE KNOW AND WHAT ARE THE IMPLICATIONS?

2018 ◽  
Vol 21 (2) ◽  
pp. 229-264 ◽  
Author(s):  
Susan Sunila Sharma
Keyword(s):  
Time Series ◽  
Unit Root ◽  
Structural Breaks ◽  
Time Series Data ◽  
Unit Roots ◽  
Series Data ◽  
Econometric Modelling ◽  
Shock Response ◽  
Macroeconomic Time Series ◽  
Root Properties

Unit root properties of macroeconomic data are important for both econometric modelling specifications and policy making. The form of variables (whether they are a unit root process) helps determine the correct econometric modelling. Equally, the form of variables helps explain how they react to shocks (both internal and external). Macroeconomic time-series data are often at the forefront of shock analysis and econometric modelling. There is a growing emphasis on research on Indonesia using time-series data; yet, there is limited understanding of data characteristics and shock response of these data. Using an extensive dataset comprising 33 macroeconomic time-series variables, we provide an informative empirical analysis of unit root properties of data. We find that regardless of data frequencies the empirical evidence of unit roots is mixed, some series respond quickly to shocks others do take time, and almost every macroeconomic data suffers from structural breaks. We draw implications of these findings.

scholarly journals Selecting between causal and noncausal models with quantile autoregressions

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Alain Hecq ◽  
Li Sun
Keyword(s):  
Time Series ◽  
Maximum Likelihood ◽  
Latin American ◽  
Financial Time Series ◽  
Selection Criterion ◽  
Likelihood Methods ◽  
Approximate Maximum Likelihood ◽  
Financial Time ◽  
Maximum Likelihood Methods ◽  
Latin American Countries

AbstractWe propose a model selection criterion to detect purely causal from purely noncausal models in the framework of quantile autoregressions (QAR). We also present asymptotics for the i.i.d. case with regularly varying distributed innovations in QAR. This new modelling perspective is appealing for investigating the presence of bubbles in economic and financial time series, and is an alternative to approximate maximum likelihood methods. We illustrate our analysis using hyperinflation episodes of Latin American countries.

scholarly journals HAS INFLATION TARGETING BEEN SUCCESSFUL? EVIDENCE FROM UNIT ROOT TESTS

2019 ◽  
Vol 78 (308) ◽  
pp. 120
Author(s):  
Mesut Turkay ◽  
Burak Sencer Atasoy
Keyword(s):  
Time Series ◽  
Unit Root ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Unit Root Tests ◽  
Policy Framework ◽  
Panel Unit Root Tests ◽  
Panel Unit Root ◽  
The World ◽  
Monetary Policy Framework

<p class="run-in" align="center"><strong>ABSTRACT</strong></p><p>The popularity of inflation targeting has risen in the last decade and the number of countries that adopted inflation targeting as their monetary policy framework surpassed 40 by the end of 2016. This study analyzes whether inflation targeting around the world has been successful in terms of achieving the announced target and keeping inflation rate around it. We argue that a successful inflation targeting necessitates the deviation of inflation from the target be stationary. We employ both time series and panel unit root tests in order to analyze the stationarity properties of deviation of inflation from the target. Results of unit root tests provide evidence in favor of the success of inflation targeting framework around the world.</p><p align="center"><strong> </strong></p><p align="center"><strong>¿HAN SIDO EXITOSAS LAS METAS DE INFLACIÓN? RESULTADOS DE LAS PRUEBAS DE RAÍZ UNITARIA</strong></p><p class="run-in" align="center"><strong>RESUMEN</strong></p>La popularidad de las metas de inflación ha aumentado en la última década y el número de países que adoptaron metas de inflación como su marco de política monetaria sobrepasó los 40 a finales del 2016. Este estudio analiza si las metas de inflación alrededor del mundo han tenido éxito en términos de alcanzar el objetivo anunciado y mantener la tasa de inflación alrededor de su meta. Argumentamos que una meta exitosa de inflación requiere que la desviación de la inflación respecto a la meta sea estacionaria. Empleamos tanto series de tiempo como pruebas de raíz unitaria en panel con el fin de analizar las propiedades estacionarias de la desviación de la inflación en relación con el objetivo. Los resultados de las pruebas de raíz unitaria proporcionan evidencia a favor del éxito del marco de metas de inflación en todo el mundo.

scholarly journals Structural Breaks and Explosive Behavior in the Long-Run: The Case of Australian Real House Prices, 1870–2020

2021 ◽  
Vol 15 (1) ◽  
pp. 72-84
Author(s):  
Vicente Esteve ◽  
Maria A. Prats
Keyword(s):  
Time Series ◽  
Unit Root ◽  
Structural Breaks ◽  
House Prices ◽  
Unit Root Tests ◽  
Annual Data ◽  
Bubble Behavior ◽  
Long Period ◽  
Long Run ◽  
Long Time

Abstract In this article, we use tests of explosive behavior in real house prices with annual data for the case of Australia for the period 1870–2020. The main contribution of this paper is the use of very long time series. It is important to use longer span data because it offers more powerful econometric results. To detect episodes of potential explosive behavior in house prices over this long period, we use the recursive unit root tests for explosiveness proposed by Phillips et al. (2011), (2015a,b). According to the results, there is a clear speculative bubble behavior in real house prices between 1997 and 2020, speculative process that has not yet been adjusted.

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