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 estimate a unit root bilinear process using the Maximum Likelihood method with log-likelihood function constructed by means of the Kalman filter, and evaluate the finite sample properties of this estimator. One hundred and six world-wide price series are tested for unit root bilinearity applying the test suggested by Charemza et al. (2002b). Applying the Maximum Likelihood estimator based on...

This paper investigates the so-called one-step local quasi–maximum likelihood estimator for the unit root process with GARCH~1,1! errors+ When the scaled conditional errors ~the ratio of the disturbance to the conditional standard deviation! follow a symmetric distribution, the asymptotic distribution of the estimated unit root is derived only under the second-order moment condition+ It is show...

We combined recent developments in univariate and multivariate unit root testing in order to construct a more-powerful panel unit root test. We extended the GLS-detrending procedure of Elliott, Rothenberg, and Stock (1996) to a panel Augmented Dickey-Fuller test. The finite sample power properties of the new test demonstrate a very large gain when compared to existing tests, especially for smal...

Linear filters used in seasonal adjustment (model-based or from the X-11 method) contain unit root factors in the form of differencing operators and seasonal summation operators. The extent to which the various filters (seasonal, seasonal adjustment, trend, and irregular) contain these unit root factors determines whether the filters reproduce or annihilate (i) fixed seasonal effects, and (ii) ...

Most panel unit root tests are designed to test the joint null hypothesis of a unit root for each individual series in a panel. After a rejection, it will often be of interest to identify which series can be deemed to be stationary and which series can be deemed nonstationary. Researchers will sometimes carry out this classi.cation on the basis of n individual (univariate) unit root tests based...

The outcome of popular unit root tests depends heavily on the initial condition, i.e. on the difference between the initial observation and the deterministic component. In some applications it is difficult to rule out small or large values of the initial condition a priori, so this dependence can be quite difficult to deal with in practice. We explore a number of methods for constructing unit r...

The restricted likelihood ratio test, RLRT, for the autoregressive coefficient in autoregressive models has recently been shown to be second order pivotal when the autoregressive coefficient is in the interior of the parameter space and so is very well approximated by the χ1 distribution. In this paper, the non-standard asymptotic distribution of the RLRT for the unit root boundary value is obt...

Numerous studies have addressed the question of the econometric specification of the Environmental Kuznets Curve (EKC). This paper adds preliminary results on nonstationarity and its effect on functional form using a panel data set for the U.S. by state from 1929 to 1994. It is found that unit-root tests strongly support a unit root in pollutants (sulfur dioxide and nitrogen oxide) and income w...