Smooth Transitions and GDP Growth in the European Union

Posted: 15 Mar 2001

See all articles by David Greenaway

David Greenaway

University of Nottingham - School of Economics

Stephen J. Leybourne

University of Nottingham

David Sapsford

University of Liverpool Management School (ULMS) - Economics Division

Abstract

In this paper we test whether GDP series in 12 European Union countries are integrated or are stationary around a deterministic component that may change gradually and smoothly between two regimes over time. We find that in two-thirds of cases there appears to be a role for modeling with deterministic functions that allow smooth transitions, in some cases standing alone, in others in conjunction with additional integrated regressors. These findings constitute a challenge to traditional approaches to modeling breaking-trend behavior in GDP, which typically impose the condition that breaks, when present, must occur instantaneously.

Suggested Citation

Greenaway, David and Leybourne, Stephen J. and Sapsford, David, Smooth Transitions and GDP Growth in the European Union. Available at SSRN: https://ssrn.com/abstract=242854

David Greenaway (Contact Author)

University of Nottingham - School of Economics ( email )

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Stephen J. Leybourne

University of Nottingham ( email )

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+44 (0)115 951 4159 (Fax)

David Sapsford

University of Liverpool Management School (ULMS) - Economics Division ( email )

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