Ruhr Economic Papers

Ruhr Economic Papers #45

A Nonlinear Unit Root Test in the Presence of an Unknown Break

by Stephan Popp

RWI, 05/2008, 24 S./p., 8 Euro, ISBN 978-3-86788-046-6



The Perron test is the most commonly applied procedure to test for a unit root in the presence of a structural break of unknown timing in the trend function. Deriving the Perron-type test regression from an unobserved component model, it is shown that the test regression in fact is nonlinear in coefficient. Taking account of the nonlinearity leads to a test with properties that are exclusively assigned to Schmidt-Phillips LM-type unit root tests.

JEL-Classification: C12, C22

Keywords: Unit root tests; nonlinear regression; structural breaks; innovational outliers