The endogenous two-break unit root test of Lumsdaine and Papell is derived assuming no structural breaks under the null. Thus, rejection of the null does not necessarily imply rejection of a unit root per se, but may imply rejection of a unit root without break. Similarly, the alternative does not necessarily imply trend stationarity with breaks, but may indicate a unit root with breaks. In this paper, we propose an endogenous two-break Lagrange multiplier unit root test that allows for breaks under both the null and alternative hypotheses. As a result, rejection of the null unambiguously implies trend stationarity.

We utilize time series tests with structural breaks to test for an adverse impact on economic growth rates in North Africa associated with the recent US financial crisis and global recession. One or two breaks are identified for each country, except for Morocco where no break is found, while breaks coincide with the 2008 financial crisis in only two of the six countries (Libya and Mauritania). These findings suggest that, in general, shocks from the recent financial crisis have only temporary effects on economic growth in these countries. Impulse response functions with breaks confirm these results. We conclude by suggesting explanations for these findings.