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Appendix A: Unit root tests

Table A1

Unit root tests, USA (1978:1-2006:4)

Series

Augmented Dickey- Fuller

KPSS

Levels

First differences

Levels

First differences

GDP

-3.07

-4.07***

0.05

0.04

U

-3.74**

-4.68***

0.06

0.07

π

-2.51

-12.41***

0.19**

0.07

π2

-3.95**

-2.63*

0.20**

0.05

-4.04**

-4.09***

0.20**

0.08

π4

-3.45*

-3.30**

0.20**

0.13

π5

-3.78**

-4.18***

0.20**

0.14

π6

-4.36***

-2.48

0.20**

0.20

π7

-3.57**

-3.23**

0.20**

0.25

πs

-2.88

-3.70***

0.20**

0.31

sMeed

-4.79***

-5.64***

0.11

0.17

sDff

-7.56***

-5.59***

0.11

0.13

S^Mom

-4.06***

-10.49***

0.06

0.13

sWMeed

-2.83

-5.37***

0.09

0.08

Sr 20

-4.30***

-5.33***

0.14*

0.03

Notes: For the ADF tests, the lag length is automatically selected based on AIC. The only exogenous
variable in the first-differenced model is a constant, while the test in levels also includes a time trend.
The null hypothesis states that the time series has a unit root. The test statistics are compared with
MacKinnon (1996) one-sided p-values. *** (**) (*) denotes rejection of the null hypothesis at the 0.99
(0.95) (0.90) level.

For the KPSS tests, the bandwidth is automatically selected based on a Newey-West using a Bartlett
kernel. The only exogenous variable in the first-differenced model is a constant, while the test in levels
also includes a time trend. The null hypothesis states that the time series is (trend-) stationary. The test
statistics are compared with the critical values from Kwiatkowski-Phillips-Schmidt-Shin (1992, Table
1). *** (**) (*) denotes rejection of the null hypothesis at the 0.99 (0.95) (0.90) level.



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