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The Mysteries of Trend
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The Mysteries of Trend

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Abstract

Trends are ubiquitous in economic discourse, play a role in much economic theory, and have been intensively studied in econometrics over the last three decades. Yet the empirical economist, forecaster, and policy maker have little guidance from theory about the source and nature of trend behavior, even less guidance about practical formulations, and are heavily reliant on a limited class of stochastic trend, deterministic drift, and structural break models to use in applications. A vast econometric literature has emerged but the nature of trend remains elusive. In spite of being the dominant characteristic in much economic data, having a role in policy assessment that is often vital, and attracting intense academic and popular interest that extends well beyond the subject of economics, trends are little understood. This essay discusses some implications of these limitations, mentions some research opportunities, and briefly illustrates the extent of the difficulties in learning about trend phenomena even when the time series are far longer than those that are available in economics.

Suggested Citation

  • Peter C. B. Phillips, 2010. "The Mysteries of Trend," Cowles Foundation Discussion Papers 1771, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:1771
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    File URL: https://cowles.yale.edu/sites/default/files/files/pub/d17/d1771.pdf
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    Citations

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    Cited by:

    1. Dong, Chaohua & Linton, Oliver, 2018. "Additive nonparametric models with time variable and both stationary and nonstationary regressors," Journal of Econometrics, Elsevier, vol. 207(1), pages 212-236.
    2. C. Vladimir Rodr'iguez-Caballero & Esther Ruiz, 2024. "Temperature in the Iberian Peninsula: Trend, seasonality, and heterogeneity," Papers 2406.14145, arXiv.org.
    3. Chen, Jia & Gao, Jiti & Li, Degui, 2012. "Semiparametric trending panel data models with cross-sectional dependence," Journal of Econometrics, Elsevier, vol. 171(1), pages 71-85.
    4. T. C. Mills & K. D. Patterson, 2015. "Modelling The Trend: The Historical Origins Of Some Modern Methods And Ideas," Journal of Economic Surveys, Wiley Blackwell, vol. 29(3), pages 527-548, July.
    5. Yonghui Zhang & Liangjun Su & Peter C. B. Phillips, 2012. "Testing for common trends in semi‐parametric panel data models with fixed effects," Econometrics Journal, Royal Economic Society, vol. 15(1), pages 56-100, February.
    6. Chen, Li & Gao, Jiti & Vahid, Farshid, 2022. "Global temperatures and greenhouse gases: A common features approach," Journal of Econometrics, Elsevier, vol. 230(2), pages 240-254.
    7. González-Rivera, Gloria & Rodríguez Caballero, Carlos Vladimir, 2023. "Modelling intervals of minimum/maximum temperatures in the Iberian Peninsula," DES - Working Papers. Statistics and Econometrics. WS 37968, Universidad Carlos III de Madrid. Departamento de Estadística.
    8. Jia Chen & Degui Li & Jiti Gao, 2013. "Non- and Semi-Parametric Panel Data Models: A Selective Review," Monash Econometrics and Business Statistics Working Papers 18/13, Monash University, Department of Econometrics and Business Statistics.
    9. Yu, Deshui & Huang, Difang & Chen, Li, 2023. "Stock return predictability and cyclical movements in valuation ratios," Journal of Empirical Finance, Elsevier, vol. 72(C), pages 36-53.

    More about this item

    Keywords

    Climate change; Etymology of trend; Paleoclimatology; Policy; Stochastic trend;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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