The discontinuous trend unit root test when the break point is misspecified

Kimio Morimune and Mitsuru Nakagawa

Mathematics and Computers in Simulation (MATCOM), 1999, vol. 48, issue 4, 417-427

Abstract: Dickey and Fuller proposed some tests for the unit root hypothesis in uni-variate time series. [P. Perron, The great crash, the oil price shock, and the unit root hypothesis, Econometrica 57 (1989) 1361–1401] extended the t-ratio type unit root tests so that they allow for a break in the deterministic trend and/or in the intercept term. The purpose of the paper is to study by simulations the effect of a misspecified break point on the tests proposed by Perron. Further, the limits of the test statistics by Perron are derived under the assumption of a misspecified break point, and the accuracy of the limit formula is examined by simulation techniques. Finally, a test is proposed which jumps the break interval instead of a break point.

Keywords: Unit root test; Break point; Asymptotic distribution (search for similar items in EconPapers)
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matcom:v:48:y:1999:i:4:p:417-427

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