Are business cycles stationary fluctuations around a deterministic trend? Empirical evidence from 79 developing countries

Narayan, P and Narayan, S 2010, 'Are business cycles stationary fluctuations around a deterministic trend? Empirical evidence from 79 developing countries', International Review of Applied Economics, vol. 24, no. 6, pp. 649-664.


Document type: Journal Article
Collection: Journal Articles

Title Are business cycles stationary fluctuations around a deterministic trend? Empirical evidence from 79 developing countries
Author(s) Narayan, P
Narayan, S
Year 2010
Journal name International Review of Applied Economics
Volume number 24
Issue number 6
Start page 649
End page 664
Total pages 16
Publisher Routledge
Abstract There is a large literature that tests the univariate time series properties of the real output series following the seminal work of Nelson and Plosser (1982). Whether or not real output is characterized by a unit root process has important implications. A unit root in real output, for instance, is inconsistent with the notion that business cycles are stationary fluctuations around a deterministic trend. In this paper, we investigate the univariate time series properties of real output for 79 developing countries using the conventional augmented Dickey and Fuller (1979) unit root test, the Zivot and Andrews' (1992) one structural break unit root test, and the Lumsdaine and Papell (1997) two structural breaks unit root test. Our main finding is that, for 40 countries, real output is stationary around a trend. This indicates that business cycles are stationary fluctuations around a deterministic trend for only 51% of the developing countries in our sample.
Subject Applied Economics not elsewhere classified
Keyword(s) Business cycles
Developing countries
Structural break unit root test
DOI - identifier 10.1080/02692171.2010.512130
Copyright notice © 2010 Taylor & Francis
ISSN 0269-2171
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