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On LM-Type Tests for Seasonal Unit Roots in the Presence of a Break in Trend
Luís Catela Nunes
C12 - Hypothesis Testing
C22 - Time-Series Models
This paper proposes tests for seasonal unit roots allowing for the presence of a break in the trend slope occurring at an unknown date. In particular, new LM type tests are derived based on the framework introduced by Hylleberg, Engle, Granger and Yoo [HEGY] (1990). Null asymptotic distributions are derived for the no break case as well as when a break is present in the data generating process. A Monte Carlo investigation on the finite sample size and power performance of the new procedures is presented.