Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks

Autores: Mark C. Strazicich, Junsoo Lee
Localización: The Review of economics and statistics, ISSN 0034-6535, Vol. 85, Nº 4, 2003, págs. 1082-1088
Idioma: inglés
DOI: 10.1162/003465303772815961
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Resumen
- The endogenous two-break unit root test of Lumsdaine and Papell is derived assuming no structural breaks under the null. Thus, rejection of the null does not necessarily imply rejection of a unit root per se, but may imply rejection of a unit root without break. Similarly, the alternative does not necessarily imply trend stationarity with breaks, but may indicate a unit root with breaks. In this paper, we propose an endogenous two-break Lagrange multiplier unit root test that allows for breaks under both the null and alternative hypotheses. As a result, rejection of the null unambiguously implies trend stationarity.