Abstract
AbstractRecent 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 Econometrics167:140–167), 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.
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