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Minimum LM unit root test with one structural break

Author

Listed:
  • 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.

Suggested Citation

  • Junsoo Lee & Mark C. Strazicich, 2013. "Minimum LM unit root test with one structural break," Economics Bulletin, AccessEcon, vol. 33(4), pages 2483-2492.
  • Handle: RePEc:ebl:ecbull:eb-13-00296
    as

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    References listed on IDEAS

    as
    1. Peter C.B. Phillips & Pierre Perron, 1986. "Testing for a Unit Root in Time Series Regression," Cowles Foundation Discussion Papers 795R, Cowles Foundation for Research in Economics, Yale University, revised Sep 1987.
    2. Uwe Hassler & Paulo M. M. Rodrigues, 2004. "Seasonal Unit Root Tests Under Structural Breaks," Journal of Time Series Analysis, Wiley Blackwell, vol. 25(1), pages 33-53, January.
    3. 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, vol. 32(2), pages 108-134, March.
    4. 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, vol. 63(5), pages 535-558, December.
    5. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October.
    6. David I. Harvey & Stephen J. Leybourne & Paul Newbold, 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, vol. 63(5), pages 559-575, December.
    7. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    8. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
    9. Vogelsang, Timothy J & Perron, Pierre, 1998. "Additional Tests for a Unit Root Allowing for a Break in the Trend Function at an Unknown Time," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 1073-1100, November.
    10. Amsler, Christine & Lee, Junsoo, 1995. "An LM Test for a Unit Root in the Presence of a Structural Change," Econometric Theory, Cambridge University Press, vol. 11(2), pages 359-368, February.
    11. 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, vol. 59(4), pages 435-448, November.
    12. repec:cup:etheor:v:11:y:1995:i:2:p:359-68 is not listed on IDEAS
    13. Junsoo Lee & Mark C. Strazicich, 2001. "Break Point Estimation and Spurious Rejections With Endogenous Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(5), pages 535-558, December.
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    More about this item

    Keywords

    Lagrange Multiplier; Unit Root Test; Structural Break; and Endogenous Break;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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