A Nonlinear Unit Root Test in the Presence of an Unknown Break

Stephan Popp

No 45, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: The Perron test is the most commonly applied procedure to test for a unit root in the presence of a structural break of unknown timing in the trend function. Deriving the Perron-type test regression from an unobserved component model, it is shown that the test regression in fact is nonlinear in coefficient. Taking account of the nonlinearity leads to a test with properties that are exclusively assigned to Schmidt-Phillips LM-type unit root tests.

Keywords: Unit root tests; nonlinear regression; structural breaks; innovational outliers (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (1)

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