Abstract
Recent approaches in unit root testing have taken into account the influences of initial conditions and data trend breaks via pre-testing and union of rejection testing strategies. This paper reviews existing methods, extends the methods of (Harvey, D. I., S. J. Leybourne, and A. M. R. Taylor. 2012b. “Unit Root Testing under a Local Break in Trend.” Journal of Econometrics 167:140–167), and integrates these techniques to create a comprehensive testing strategy. Even when presented with nuisance parameters such as initial conditions and data breaks, this new strategy holds promising asymptotic and finite sample properties.
Acknowledgements
Author thanks Robert Taylor and two anonymous referees for helpful comments. Author also thanks Jesse Benzell for careful proofreading.
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Supplemental Material
The online version of this article offers supplementary material (https://doi.org/10.1515/jtse-2016-0014).
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