Are output fluctuations transitory or permanent? New evidence from a novel Global Multi-scale Modeling approach

Mumtaz Ahmed; Muhammad Azam; Stelios Bekiros; Syeda Mahlaqa Hina; Mumtaz Ahmed; Muhammad Azam; Stelios Bekiros; Syeda Mahlaqa Hina

doi:10.3934/QFE.2021017

Quantitative Finance and Economics

2021, Volume 5, Issue 3: 373-396. doi: 10.3934/QFE.2021017

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Research article

Are output fluctuations transitory or permanent? New evidence from a novel Global Multi-scale Modeling approach

1.
Department of Economics, COMSATS University Islamabad (CUI), Park Road Chak Shehzad, Islamabad, Pakistan
2.
Department of Economics, Faculty of Business & Economics, Abdul Wali Khan University Mardan, Khyber Pakhtunkhwa, Pakistan
3.
School of Economics, Finance & Banking, College of Business, Universiti Utara Malaysia, Sintok, Kedah, Malaysia
4.
University of Malta, Department of Banking and Finance, FEMA, Msida, Malta
5.
European University Institute, Department of Economics, Via delle Fontanelle, 18, I-50014, Florence, Italy
6.
Department of Management Sciences, COMSATS University Islamabad, Pakistan

Received: 09 January 2021 Accepted: 16 May 2021 Published: 20 May 2021
JEL Codes: E01, C22, C23, C54, C63

This paper provides new insights to the long-standing debate initiated by Nelson-Plosser (1982) regarding the mean reverting behaviour of real GDP per capita. The empirical analysis is based on wavelet framework introduced in Aydin and Pata Aydin (2020) which considers not only frequency domain along with time domain but also takes care of smooth structural changes ignored by earlier wavelet based unit root tests, and covers latest available data on 177 countries across the globe. Specifically, the countries are classified into seven different regions (East Asia and Pacific Region, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, North America, South Asia and Sub-Saharan Africa) as per guidelines of World Bank. The empirical findings yield interesting insights and several new lessons for practitioners and policy analysts.
- discrete wavelet transform,
- stationarity,
- real GDP per capita,
- multi-resolution approach,
- wavelet unit root test,
- smooth structural change
Citation: Mumtaz Ahmed, Muhammad Azam, Stelios Bekiros, Syeda Mahlaqa Hina. Are output fluctuations transitory or permanent? New evidence from a novel Global Multi-scale Modeling approach[J]. Quantitative Finance and Economics, 2021, 5(3): 373-396. doi: 10.3934/QFE.2021017

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Abstract

This paper provides new insights to the long-standing debate initiated by Nelson-Plosser (1982) regarding the mean reverting behaviour of real GDP per capita. The empirical analysis is based on wavelet framework introduced in Aydin and Pata Aydin (2020) which considers not only frequency domain along with time domain but also takes care of smooth structural changes ignored by earlier wavelet based unit root tests, and covers latest available data on 177 countries across the globe. Specifically, the countries are classified into seven different regions (East Asia and Pacific Region, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, North America, South Asia and Sub-Saharan Africa) as per guidelines of World Bank. The empirical findings yield interesting insights and several new lessons for practitioners and policy analysts.

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