Are Business Cycles Stationary Fluctuations Around a Deterministic Trend? Empirical Evidence from 79 Developing Countries

Posted: 10 Jun 2012

See all articles by Paresh Kumar Narayan

Paresh Kumar Narayan

Deakin University - School of Accounting, Economics and Finance

Seema Narayan

affiliation not provided to SSRN

Date Written: 2010

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.

Suggested Citation

Narayan, Paresh Kumar and Narayan, Seema, Are Business Cycles Stationary Fluctuations Around a Deterministic Trend? Empirical Evidence from 79 Developing Countries (2010). International Review of Applied Economics, Vol. 24, pp. 649-664, 2010, Available at SSRN: https://ssrn.com/abstract=2080546

Paresh Kumar Narayan (Contact Author)

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

Seema Narayan

affiliation not provided to SSRN ( email )

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
283
PlumX Metrics