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Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks

Author

Listed:
  • Junsoo Lee

    (University of Alabama and University of Central Florida)

  • Mark C. Strazicich

    (University of North Texas)

Abstract
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. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
    • Handle: RePEc:tpr:restat:v:85:y:2003:i:4:p:1082-1089
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