DETERMINISTIC, STOCHASTIC, AND SEGMENTED TRENDS IN AGGREGATE OUTPUT: A CROSS-COUNTRY ANALYSIS

This paper examines whether output per capita in 126 countriesis better described as trend or difference stationary, usingappropriate finite-sample critical values. Depending upon whetherone uses solely a test with a trend stationary null, or solelyone with a difference stationary null, very different conclusionsare obtained. This outcome suggests that it is useful to considerthe tests complementary, rather than competing. We find thatwhen a definite characterization of GDP can be made, it is verylikely to indicate a difference stationary process. However,the likelihood of making definite conclusions does vary positivelywith both income level and data quality.