Testing Non-Stationarity in Selected Macroeconomic Series from Sudan

Abstract

The study tested stationarity in a selected set of macroeconomic variables (some constructed) from Sudan over the period 1969 to 1998. Augmented Dickey Fuller tests were employed to test for presence of unit roots. The study found that unit roots existed in most variables, namely, private  investment, public investment, real income, credit, interest rate and rate of capacity utilisation. On the contrary, real exchange rate, indebtedness and instability series exhibited a stationary behaviour. Testing for order of  integration by running non-stationarity tests for first difference of  non-stationary variables indicated I(1) series. The study then discussed the implications of using non-stationary series in estimation by employing a simple investment demand model. Noting the tendency of   macroeconomic variables to exhibiting unit root, the study asserted the necessity of preceding non-stationarity tests to any estimation or  hypothesis testing in order to understand behaviour of time series under consideration. JEL Classification: C, C22, C32, C82.

Keywords: Stationarity, time series, DF tests, Sudan.