The Mysteries of Trend

13 Pages Posted: 14 Sep 2010

See all articles by Peter C. B. Phillips

Peter C. B. Phillips

University of Auckland Business School; Yale University - Cowles Foundation; Singapore Management University - School of Economics

Date Written: August 22, 2010


Trends are ubiquitous in economic discourse, play a role in much economic theory, and have been intensively studied in econometrics over the last three decades. Yet the empirical economist, forecaster, and policy maker have little guidance from theory about the source and nature of trend behavior, even less guidance about practical formulations, and are heavily reliant on a limited class of stochastic trend, deterministic drift, and structural break models to use in applications. A vast econometric literature has emerged but the nature of trend remains elusive. In spite of being the dominant characteristic in much economic data, having a role in policy assessment that is often vital, and attracting intense academic and popular interest that extends well beyond the subject of economics, trends are little understood. This essay discusses some implications of these limitations, mentions some research opportunities, and briefly illustrates the extent of the difficulties in learning about trend phenomena even when the time series are far longer than those that are available in economics. 

Keywords: Climate change, Etymology of trend, Paleoclimatology, Policy, Stochastic trend

JEL Classification: C22

Suggested Citation

Phillips, Peter C. B., The Mysteries of Trend (August 22, 2010). Cowles Foundation Discussion Paper No. 1771, Available at SSRN: or

Peter C. B. Phillips (Contact Author)

University of Auckland Business School ( email )

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Yale University - Cowles Foundation ( email )

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United States
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Singapore Management University - School of Economics

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