A simple unit root testing methodology that does not require knowledge regarding the presence of a break |
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Authors: | Amit Sen |
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Affiliation: | Department of Economics, Xavier University, Cincinnati, OH, USA |
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Abstract: | We develop a simple methodology that allows practitioners to test for the presence of a unit root without a priori knowledge regarding the occurrence of a break under the null hypothesis. We use a pre-test that is readily available in the estimated regression used to calculate the unit root statistics, and so our methodology is very easy to implement. The t-statistic corresponding to the impulse dummy variables evaluated at break date estimator is used as a pre-test to ascertain whether a break exists under the null hypothesis. Finite sample simulations show that our methodology yields tests that maintain their size. |
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Keywords: | Break date Level shift model Mixed model Unit root |
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