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Testing for Equilibrium in the Australian Wage Equation *
Author(s) -
LEWIS PHILIP E.T.,
MacDONALD GARRY A.
Publication year - 1993
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1993.tb02109.x
Subject(s) - cointegration , unit root , wage , econometrics , economics , augmented dickey–fuller test , series (stratigraphy) , order of integration (calculus) , range (aeronautics) , contradiction , mathematics , labour economics , mathematical analysis , geology , engineering , paleontology , philosophy , epistemology , aerospace engineering
In this paper a range of unit root and cointegration tests are applied to the time‐series variables most commonly found in the various specifications of the Australian wage equation. We find a contradiction between the standard Dickey‐Fuller (DF) tests and the results from Johansen estimation regarding the order of integration. The conclusion we reach using tests developed by Perron (1989,1990) is that all the variables are trend stationary processes and that the cointegration framework is inappropriate in this case.