More Uncertainty About the Unit Root in U.S. Real Gnp
16 Pages Posted: 1 Feb 1997
Date Written: June 10, 1996
The new KPSS test is used to test the null hypothesis that U.S. real GNP is a trend stationary process. When appropriately sized, the test fails to reject the trend stationary null. This provides an important counter-example to the generic inability to reject the difference stationary null hypothesis for output by classical hypothesis testing. The evidence in favor of the trend stationary representation is weakened, however, by showing that such size correction dramatically reduces power. Reversing the null and alternative hypotheses, this paper complements Rudebusch's (1993) recent analysis.
JEL Classification: C22, E30
Suggested Citation: Suggested Citation