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Smooth Transitions and GDP Growth in the European Union
Author(s) -
Greenaway David,
Leybourne Stephen,
Sapsford David
Publication year - 2000
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00187
Subject(s) - economics , european union , econometrics , real gross domestic product , component (thermodynamics) , macroeconomics , international economics , physics , thermodynamics
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 modelling 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 modelling breaking‐trend behaviour in GDP, which typically impose the condition that breaks, when present, must occur instantaneously.