1. Applied Econometric Time Series Third Edition
Walter Enders, University of Alabama
Copyright © 2010 John Wiley & Sons, Inc.

2. Chapter 4 MODELS WITH TREND

3. 1. DETERMINISTIC AND STOCHASTIC TRENDS
The Random Walk Model
The Random Walk Plus Drift Model
Generalizations of the Stochastic Trend Model

7. 2. REMOVING THE TREND Differencing Detrending
Difference versus Trend-Stationary Models
Are There Business Cycles?
The Trend in Real GDP

11. 3. UNIT ROOTS AND REGRESSION RESIDUALS

12. 4. THE MONTE CARLO METHOD Monte Carlo Experiments
Example of the Monte Carlo Method
Generating the Dickey–Fuller Distribution

15. 5. DICKEY–FULLER TESTS
An Example

17. 6. EXAMPLES OF THE DICKEY–FULLER TEST
Quarterly Real U.S. GDP
Unit Roots and Purchasing Power Parity

21. 7. EXTENSIONS OF THE DICKEY–FULLER TEST
Selection of the Lag Length
The Test with MA Components
Lag Lengths and Negative MA Terms
Multiple Roots
Seasonal Unit Roots

24. 8. STRUCTURAL CHANGE Perron’s Test for Structural Change
Perron’s Test and Real Output
Tests with Simulated Data

28. 9. POWER AND THE DETERMINISTIC REGRESSORS
Determination of the Deterministic Regressors

30. 10. TESTS WITH MORE POWER
An Example

31. 11. PANEL UNIT ROOT TESTS
Limitations of the Panel Unit Root Test

34. 12. TRENDS AND UNIVARIATE DECOMPOSITIONS
The General ARIMA (p, 1, q) Model
The Unobserved Components Decomposition
The Hodrick–Prescott Decomposition

36. 13. SUMMARY AND CONCLUSIONS

37. APPENDIX 4.1: THE BOOTSTRAP
Bootstrapping Regression Coefficients

38. APPENDIX 4.2: DETERMINATION OF THE DETERMINISTIC REGRESSORS
GDP and Unit Roots