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A Cautionary Note on the Order of Integration of Post‐war Aggregate Wage, Price and Productivity Measures
Author(s) -
Sollis Robert,
Wohar Mark E.
Publication year - 2004
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/j.1467-9957.2004.00392.x
Subject(s) - economics , order (exchange) , productivity , aggregate (composite) , econometrics , granger causality , wage , order of integration (calculus) , causality (physics) , macroeconomics , labour economics , mathematics , physics , finance , mathematical analysis , materials science , quantum mechanics , composite material
We investigate the order of integration of aggregate wage, price and productivity measures for the USA. Our investigation differs from previous studies as we employ recently developed tests that allow, under the alternative hypothesis, for structural change between periods in which the data are integrated of order zero, I(0), and integrated of order one, I(1). The tests reveal that some of the time series examined are neither exclusively I(0) or I(1) and that in fact breaks in the order of integration have occurred, suggesting the need for caution when undertaking Granger‐causality tests involving these variables.