Are unit root tests useful in the debate over the (non)stationarity of hours worked?

Amélie Charles (1) , Olivier Darné (2) , Fabien Tripier (3, 4)

1 Audencia Recherche
2 LEMNA - Laboratoire d'économie et de management de Nantes Atlantique
3 CEPII - Centre d'Etudes Prospectives et d'Informations Internationales
4 CLERSÉ - Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019

The performance of unit root tests on simulated series is compared, using the business-cycle model of Chang et al. (2007) to generate data. Overall, Monte Carlo simulations show that the e¢ cient unit root tests of Ng and Perron (2001) are more powerful than the standard unit root tests. These e¢ cient tests are frequnetly able (i) to reject the unit-root hypothesis on simulated series, using the best speci…-cation of the business-cycle model found by Chang et al. (2007), in which hours worked are stationary with adjustment costs, and (ii) to reduce the gap between the theoretical impulse response functions and those estimated with a Structural VAR model. The results of Monte Carlo simulations show that the hump-shaped behaviour of data can explain the divergence between unit root tests.

Mots clés: Unit Root Test; DSGE Models; Hours Worked; Structural VAR

Domaines: Économie et finance quantitative [q-fin]

Amélie Charles, Olivier Darné, Fabien Tripier. Are unit root tests useful in the debate over the (non)stationarity of hours worked?. Macroeconomic Dynamics, 2015, 19, pp.167 - 188. ⟨10.1017/S1365100513000321⟩. ⟨hal-01101618⟩