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Minimum LM unit root test with one structural break

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  • Junsoo Lee

    ()
    (University of Alabama)

  • Mark C. Strazicich

    ()
    (Appalachian State University)

Abstract

In this paper, we consider the minimum Lagrange Multiplier (LM) unit root test with one structural break in intercept and trend. This paper complements the earlier work of Lee and Strazicich (2003), who consider the minimum LM unit root test with two breaks. The asymptotic properties are derived, critical values are provided, and size and power properties are examined. The one-break minimum LM unit root test is valid in the presence of a break under the null and alternative hypotheses and is free of spurious rejections.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 33 (2013)
Issue (Month): 4 ()
Pages: 2483-2492

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Handle: RePEc:ebl:ecbull:eb-13-00296

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Keywords: Lagrange Multiplier; Unit Root Test; Structural Break; and Endogenous Break;

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References

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  1. Uwe Hassler & Paulo M. M. Rodrigues, 2004. "Seasonal Unit Root Tests Under Structural Breaks," Journal of Time Series Analysis, Wiley Blackwell, Wiley Blackwell, vol. 25(1), pages 33-53, 01.
  2. Amsler, Christine & Lee, Junsoo, 1995. "An LM Test for a Unit Root in the Presence of a Structural Change," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 11(02), pages 359-368, February.
  3. Perron, P., 1994. "Further Evidence on Breaking Trend Functions in Macroeconomic Variables," Cahiers de recherche, Centre interuniversitaire de recherche en économie quantitative, CIREQ 9421, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  4. Vogelsang, T.J. & Perron, P., 1994. "Additional Tests for a Unit Root Allowing for a Break in the Trend Function at an Unknown Time," Cahiers de recherche, Centre interuniversitaire de recherche en économie quantitative, CIREQ 9422, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  5. Lee, Junsoo & Strazicich, Mark C, 2001. " Break Point Estimation and Spurious Rejections with Endogenous Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 63(5), pages 535-58, December.
  6. Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 944, Cowles Foundation for Research in Economics, Yale University.
  7. Phillips, P.C.B., 1986. "Testing for a Unit Root in Time Series Regression," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 8633, Universite de Montreal, Departement de sciences economiques.
  8. Joseph P. Byrne & Roger Perman, 2006. "Unit Roots and Structural Breaks: A Survey of the Literature," Working Papers, Business School - Economics, University of Glasgow 2006_10, Business School - Economics, University of Glasgow.
  9. repec:cup:etheor:v:11:y:1995:i:2:p:359-68 is not listed on IDEAS
  10. Schmidt, Peter & Phillips, C B Peter, 1992. "LM Tests for a Unit Root in the Presence of Deterministic Trends," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 54(3), pages 257-87, August.
  11. Luis C. Nunes & Paulo M. M. Rodrigues, 2011. "On LM‐type tests for seasonal unit roots in the presence of a break in trend," Journal of Time Series Analysis, Wiley Blackwell, Wiley Blackwell, vol. 32(2), pages 108-134, 03.
  12. Harvey, David I & Leybourne, Stephen J & Newbold, Paul, 2001. " Innovational Outlier Unit Root Tests with an Endogenously Determined Break in Level," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 63(5), pages 559-75, December.
  13. Nunes, Luis C & Newbold, Paul & Kuan, Chung-Ming, 1997. "Testing for Unit Roots with Breaks: Evidence on the Great Crash and the Unit Root Hypothesis Reconsidered," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 59(4), pages 435-48, November.
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