Modification of the LM unit root test

Dimitrios Vougas

Applied Economics Letters, 2007, vol. 14, issue 12, 913-917

Abstract: This article proposes a modified version of the Langrange Multiplier (LM) test for a unit root, which is efficient and avoids arbitrary estimation of the levels regression intercept. If required, this intercept can be estimated indirectly in the second-step autoregression. In addition to simple-hypothesis LM unit root tests, a new F-type version of the test is proposed, which is based on a joint hypothesis. Parametric augmentation is discussed in detail, and simulated new critical values are provided.

Date: 2007
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DOI: 10.1080/13504850600690038

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