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Test Procedures for Unit Roots in Time Series with Level Shifts at Unknown Time

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  • Markku Lanne
  • Helmut Lütkepohl
  • Pentti Saikkonen

Abstract

Two types of unit root tests which accommodate a structural level shift at a known point in time are extended to the situation where the break date is unknown. It is shown that for any estimator for the break date the tests have the same asymptotic distribution as the corresponding tests under the known break date assumption. Different estimators of the break date are compared in a Monte Carlo experiment and a recommendation for choosing the break date in small samples is given. Example series from the Nelson–Plosser data set are used to illustrate the performance of our tests.

Suggested Citation

  • Markku Lanne & Helmut Lütkepohl & Pentti Saikkonen, 2003. "Test Procedures for Unit Roots in Time Series with Level Shifts at Unknown Time," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(1), pages 91-115, February.
    • Handle: RePEc:bla:obuest:v:65:y:2003:i:1:p:91-115
    DOI: 10.1111/1468-0084.00036
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    References listed on IDEAS

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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