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Unit roots and structural breakpoints in China’s macroeconomic and financial time series |
| LIANG Qi1, TENG Jianzhou2 |
| 1.Department of Finance, School of Economics, Nankai University, Tianjin 300071, China; 2.Graduate School of Economics, Hitotsubashi University, Kunitachi, Tokyo 186-8601, Japan Key Laboratory for Applied Statistics of MOE, Northeast Normal University, Changchun 130024, China |
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Abstract This paper applies unit-root tests to 10 Chinese macroeconomic and financial time series that allow for the possibility of up to two endogenous structural breaks. We found that 6 of the series, i.e., GDP, GDP per capita, employment, bank credit, deposit liabilities and investment, can be more accurately characterized as a segmented trend stationarity process around one or two structural breakpoints as opposed to a stochastic unit root process. Our findings have important implications for policy-makers to formulate long-term growth strategy and short-run stabilization policies, as well as causality analysis among the series.
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Issue Date: 05 December 2006
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