Are Real Output Fluctuations Transitory or Permanent? A Panel Data Analysis for OECD Countries

According to the Classical view of business cycle, fluctuations in real output represent temporary deviations from trend. The aim of this paper is to examine whether output fluctuations are transitory or permanent in OECD countries. For this purpose three panel unit root tests advocated by Choi (2001), Demetrescu et al. (2006), and Constantini and Lupi (2013) are applied to per capita real GDP data for 27 OECD countries over the period 1975 to 2012. The empirical results from panel unit roots tests indicate that per capita real GDP for the entire countries are stationary. These findings imply that GDP fluctuations in OECD countries are overall transitory.