Minimum LM Unit Root Test with Two Structural Breaks
نویسندگان
چکیده
The two-break unit root test of Lumsdaine and Papell (1997) is examined and found to suffer from bias and spurious rejections in the presence of structural breaks under the null. A two-break minimum LM unit root test is proposed as a remedy. The two-break LM test does not suffer from bias and spurious rejections and is mostly invariant to the size, location, and misspecification of the breaks. We test the Nelson and Plosser (1982) data and find fewer rejections of the unit root than Lumsdaine and Papell. JEL classification: C12, C15, and C22
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