This paper provides a selective survey of the recent literature of unit root econometrics. Since the seminal work of Nelson and Plosser (1982) was published, much theoretical and empirical research has been done in the area of unit root nonstationarity. Nelson and Plosser found that the null hypothesis of unit root nonstationarity was not rejected for many macroeconomic series. When a linear combination of unit root nonstationary variables is stationary, they are said to be cointegrated. Recent developments in estimation method for cointegrated systems allow researchers to estimate structural parameters and make inferences without exogeneity assumptions.
Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.