Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks

Junsoo Lee; Mark C. Strazicich

doi:10.1162/003465303772815961

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Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks

Junsoo Lee^1,2; Mark C. Strazicich³

¹ University of Central Florida · ² University of Alabama · ³ University of North Texas

The Review of Economics and Statistics 2003 open access

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.

DOI: 10.1162/003465303772815961
Volume: 85 (4)
Pages: 1082-1089
Language: en
Export: BibTeX
Sources: openalex crossref