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Is real GDP per capita a stationary process? Smooth transitions, nonlinear trends and unit root testing

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  • Juan Carlos Cuestas
  • Dean Garratt
Abstract
The aim of this paper is to provide additional evidence about the order of integration of constant price GDP per capita in a selection of countries. It does so by taking into account the possibility of non-linear deterministic trends and of asymmetric adjustment towards equilibrium. We find evidence of a global stationary ESTAR process around a nonlinear deterministic trend in almost half of the selected countries. These results show that nonlinearities affect real GDP series. By neglecting them, one can draw misleading conclusions from unit root tests. Specifically, the paper questions the so-called stylised fact of a near unit root which has so influenced macroeconomic thought over the past two decades.

Suggested Citation

  • Juan Carlos Cuestas & Dean Garratt, 2008. "Is real GDP per capita a stationary process? Smooth transitions, nonlinear trends and unit root testing," NBS Discussion Papers in Economics 2008/12, Economics, Nottingham Business School, Nottingham Trent University.
    • Handle: RePEc:nbs:wpaper:2008/12
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Burak GÜRIŞ & İpek M. YURTTAGÜLER & Muhammed TIRAŞOĞLU, 2017. "Unemployment convergence analysis for Nordic countries: Evidence from linear and nonlinear unit root tests," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(610), S), pages 45-56, Spring.
    2. repec:zbw:bofitp:2015_015 is not listed on IDEAS
    3. Mikhail Stolbov, 2017. "Causality between credit depth and economic growth: evidence from 24 OECD countries," Empirical Economics, Springer, vol. 53(2), pages 493-524, September.
    4. Jan Bentzen, 2015. "Comparing data sources of real GDP in purchasing power parities," Applied Economics Letters, Taylor & Francis Journals, vol. 22(16), pages 1303-1308, November.
    5. repec:zbw:bofitp:urn:nbn:fi:bof-201505061169 is not listed on IDEAS
    6. Kaufmann, Hendrik & Kruse, Robinson & Sibbertsen, Philipp, 2012. "On tests for linearity against STAR models with deterministic trends," Economics Letters, Elsevier, vol. 117(1), pages 268-271.
    7. Ömer YALÇINKAYA & Ali Kemal ÇELİK, 2021. "The Impact of Global Uncertainties on Economic Growth: Evidence from the US Economy (1996: Q1-2018: Q4)," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 35-54, June.
    8. Pei-Long Shen & Chih-Wei Su & Hsu-Ling Chang, 2013. "Are real GDP levels nonstationary across Central and Eastern European countries?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 13(1), pages 99-108, July.
    9. Juan Laborda & Sonia Ruano & Ignacio Zamanillo, 2023. "Multi-Country and Multi-Horizon GDP Forecasting Using Temporal Fusion Transformers," Mathematics, MDPI, vol. 11(12), pages 1-26, June.
    10. Emmanuel Anoruo & Vasudeva N.R. Murthy, 2014. "Testing Nonlinear Inflation Convergence for the Central African Economic and Monetary Community," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 1-7.
    11. Helmut Herwartz & Yabibal M. Walle, 2018. "A powerful wild bootstrap diagnosis of panel unit roots under linear trends and time-varying volatility," Computational Statistics, Springer, vol. 33(1), pages 379-411, March.
    12. Lange, Steffen & Pütz, Peter & Kopp, Thomas, 2018. "Do Mature Economies Grow Exponentially?," Ecological Economics, Elsevier, vol. 147(C), pages 123-133.
    13. Sakiru Adebola Solarin, 2017. "Testing for the Stationarity in Total Factor Productivity: Nonlinearity Evidence from 79 Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(1), pages 141-158, March.
    14. Mikhail Stolbov, 2017. "Causality between credit depth and economic growth: evidence from 24 OECD countries," Empirical Economics, Springer, vol. 53(2), pages 493-524, September.
    15. Phiri, Andrew, 2018. "Robust analysis of convergence in per capita GDP in BRICS economies," MPRA Paper 86936, University Library of Munich, Germany.
    16. Kitov, Ivan, 2012. "Why price inflation in developed countries is systematically underestimated," MPRA Paper 39059, University Library of Munich, Germany.
    17. Burak GÜRIŞ & İpek M. YURTTAGÜLER & Muhammed TIRAŞOĞLU, 2017. "Unemployment convergence analysis for Nordic countries: Evidence from linear and nonlinear unit root tests," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 45-56, Spring.
    18. Burak Güriş & Burcu Yavuz Tiftikçigil & Muhammed Tıraşoğlu, 2017. "Testing for unemployment hysteresis in Turkey: evidence from nonlinear unit root tests," Quality & Quantity: International Journal of Methodology, Springer, vol. 51(1), pages 35-46, January.
    19. neifar, malika, 2020. "Efficiency-Market Hypothesis: case of Tunisian and 6 ‎Asian stock markets ‎," MPRA Paper 103232, University Library of Munich, Germany.
    20. Sakiru Solarin & Emmanuel Anoruo, 2015. "Nonlinearity and the Unit Root Hypothesis for African Per Capita Real GDP," International Economic Journal, Taylor & Francis Journals, vol. 29(4), pages 617-630, December.
    21. repec:bof:bofitp:urn:nbn:fi:bof-201505061169 is not listed on IDEAS

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    More about this item

    Keywords

    Real GDP per capita; Unit root tests; Persistence; Nonlinearities; Smooth transitions;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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