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Discussion Paper Details

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Title: The Unit Root Hypothesis in Long-term Output: Evidence from Two Structural Breaks for 16 Countries

Author(s): Dan Ben-David, Robin L Lumsdaine and David Papell

Publication Date: February 1996

Keyword(s): unit root hypothesis, trend breaks, growth

Programme Area(s): International Macroeconomics

Abstract: Recent literature has documented the sensitivity of unit root tests to failure to account for structural change. This paper reconsiders international evidence on the unit root hypothesis while allowing for two structural breaks. We find evidence of two breaks in three-quarters of the data, rejecting the unit root hypothesis in 50% more cases than models that allow for only one structural break. Most of the trend breaks are associated with a change in output levels. As the neo-classical growth model predicts, the magnitude of these level changes is shown here to be related to changes in growth rates during the period following the break.

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Bibliographic Reference

Ben-David, D, Lumsdaine, R and Papell, D. 1996. 'The Unit Root Hypothesis in Long-term Output: Evidence from Two Structural Breaks for 16 Countries'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1336