Deterministic vs. Stochastic Trend in U.S. GNP, Yet Again / Francis X. Diebold, Abdelhak S. Senhadji.

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Diebold, Francis X

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w5481.Publication details: Cambridge, Mass. National Bureau of Economic Research 1996.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: A sleepy consensus has emerged that U.S. GNP data are uninformative as to whether trend is better described as deterministic or stochastic. Although the distinction is not critical in some contexts, it is important for point forecasting, because the two models imply very different long-run dynamics and hence different long-run forecasts. We argue that, even for the famously recalcitrant GNP series, unit root tests over long spans can be informative. Our results make clear that uncritical repetition of the `we don't know, and we don't care' mantra is just as scientifically irresponsible as blind adoption of the view that `all macroeconomic series are difference-stationary,' or the view that `all macroeconomic series are trend-stationary.' There is simply no substitute for serious, case- by-case analysis.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w5481 (Browse shelf(Opens below))	Not For Loan

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March 1996.

A sleepy consensus has emerged that U.S. GNP data are uninformative as to whether trend is better described as deterministic or stochastic. Although the distinction is not critical in some contexts, it is important for point forecasting, because the two models imply very different long-run dynamics and hence different long-run forecasts. We argue that, even for the famously recalcitrant GNP series, unit root tests over long spans can be informative. Our results make clear that uncritical repetition of the `we don't know, and we don't care' mantra is just as scientifically irresponsible as blind adoption of the view that `all macroeconomic series are difference-stationary,' or the view that `all macroeconomic series are trend-stationary.' There is simply no substitute for serious, case- by-case analysis.