A Unit Root Test with Structural Change for Japanese Macroeconomic Variables

Abstract

The problem of a time trend in the unit root test is first discussed and then a unit root test for Japanese macroeconomic variables under the assumption that a structural change has occurred in the time trend is conducted. Many Japanese macroeconomic variables exhibit a structural change in the data generating process around 1970. Once such a structural change in the time trend is taken into account, many real economic variables (such as real GNP) are found to follow a trend stationary process.