Unit roots versus segmented trends in developing country output series

Abstract

This paper examines the null hypothesis that output series contain a unit root against the alternative of a segmented trend in a representative sample of 31 developing countries. Nearly two-thirds of the countries reject the unit root hypothesis at least once in favour of a segmented trend representation. A large majority of endogenously determined structural breaks occur around the time of the first or the second oil price shock, and are of negative sign.