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Economic Quarterly

Spring 1993

Unit Roots in Macroeconomic Time Series: Some Critical Issues

Bennett T. McCallum

The relevant question concerning “unit roots” in the U.S. real GNP time series pertains to the relative importance of difference-stationary and trend-stationary components. Various analytical approaches indicate that an accurate answer is not obtainable with existing data. Also considered is whether trending series should be differenced prior to use in regression analysis. In addition, it is argued that the absence of cointegration among variables does not imply the absence of any practicality useful long-run relationship.

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