Innovational Outlier Unit Root Tests With an Endogenously Determined Break in Level

David Harvey, Stephen J. Leybourne and Paul Newbold

Oxford Bulletin of Economics and Statistics, 2001, vol. 63, issue 5, 559-575

Abstract: We show that a standard unit root test that permits an endogenously determined break in level can generate spurious rejections in practically interesting sample sizes when a large break occurs under the null hypothesis. This problem, which occurs for breaks of the innovational outlier type, can be corrected through a simple modification of the test procedure.

Date: 2001
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