Trends and random walks in macroeconomic time series (Q1112530)

This paper presents a summary of recent work on a new methodology to test for the presence of a unit root in univariate time series models. The stochastic framework is quite general. While the Dickey-Fuller approach accounts for the autocorrelation of the first-differences of a series in a parametric fashion by estimating additional nuisance parameters, this new approach deals with this phenomenon in a nonparametric way. We apply these new tests to reassess recent findings on the behavior of common macroeconomic time series, including the various series studied by \textit{C. Nelson} and \textit{C. Plosser} [J. Monetary Econ. 10, 139-162 (1982)].