ABSTRACT
It is now generally accepted that there are two types of trends: deterministic and stochastic. The former becomes stationary after removing the deterministic trends, and the latter is stationary after taking a difference operation. Accordingly, the former is termed ‘trend stationary’ (TS) and the latter ‘difference stationary’ (DS). Nelson and Plosser (1982) separate the two types of trends in an ARIMA process, and summarise their respective behaviour. Hodrick and Prescot (1980), Harvey (1985) and Clark (1987) also form part of the trend-cycle literature.
