Non-stationarity, Unit Root, and Structural Break

Nonstationary time series exhibits trend in mean, in variance, or in both. Trend in mean is the deterministic trend showing accumulation of values of the variable itself on average. Trend in variance, on the other hand, is called the stochastic trend which shows accumulation of shocks. The type of non-stationarity of a time series depends on the type of trend present in the series. The implications of different types of non-stationarity are very much important in analysing applied macro-econometric models. When the nonstationary behaviour of a time series changes suddenly, it experiences structural break. Structural break is a common feature of many macroeconomic time series variables.