Sequential Procedure for Testing Unit Roots in the Presence of Structural Break in Time Series Data

Min B. Shrestha () and Khorshed Chowdhury ()
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Khorshed Chowdhury: University of Wollongong, http://www.uow.edu.au/commerce/econ/who/index.html

Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia

Abstract: Testing for unit roots has special significance in terms of both economic theory and the interpretation of estimation results. As there are several methods available, researchers face method selection problem while conducting the unit root test on time series data in the presence of structural break. This paper proposes a sequential search procedure to determine the best test method for each time series. Different test methods or models may be appropriate for different time series. Therefore, instead of sticking to one particular test method for all the time series under consideration, selection of a set of mixed methods is recommended for obtaining better results.

Keywords: Time Series; Stationarity; Unit Root Test; Structural Break; Sequential Procedure (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2005
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