Is Chinese provincial real GDP per capita nonstationary.pdfVIP

China Economic Review 15 (2004) 1 – 24 Is Chinese provincial real GDP per capita nonstationary? Evidence from multiple trend break unit root tests Russell SMYTH a,*, Brett INDERb a Department of Economics, Monash University, P.O. Box 11E, 3800 Clayton, Victoria, Australia b Department of Econometrics, Monash University, 3800 Clayton, Victoria, Australia Accepted 9 June 2003 Abstract This article examines the unit root hypothesis for real GDP per capita in 25 of China’s provinces. When we test for unit roots assuming either no structural breaks or one structural break, the evidence supports the unit root hypothesis. With multiple structural breaks, the evidence against a unit root is mixed. When both breaks in the trend function are restricted to the intercept, there is no additional evidence against the unit root hypothesis. However, with breaks in the intercept and the slope of the trend function, the unit root hypothesis can be rejected for just under half of the provinces. D 2003 Elsevier Inc. All rights reserved. JEL classification: C22; O1; O4 Keywords: China; Economic growth; Structural break; Unit root 1. Introduction Since Nelson and Plosser’s (1982) seminal article, a large literature has evolved that investigates the potential nonstationarity of macroeconomic time series data. The question of whether real GDP can be characterized by unit roots has been an issue of particular interest (see, e.g., Ben-David Papell, 1995; Cheung Chinn, 1996; Rapach, 2002).1 Nelson and Plosser note that a unit root in real output is inconsistent with the notion * Corresponding author. Tel.: +61-3-9905-1560; fax: +61-3-9905-5476. E-mail addresses: Russell.Smyth@BusE.au (R. Smyth), Brett.Inder@BusE.au (B. Inder)