Minimum Lagrange Multiple Unit Root Test With Two Structural Breaks

ASU Author/Contributor (non-ASU co-authors, if there are any, appear on document)
Mark Strazicich Ph.D., Professor (Creator)
Appalachian State University (ASU )
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Abstract: 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.

Additional Information

Lee, J. & Strazicich, M.C. (2003). Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks. Review of Economics and Statistics, 85(4): 1082-1089 (Nov 2003). Published by MIT Press (ISSN: 0034-6535). Original version available at:
Language: English
Date: 2003

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