Abstract
This chapter is concerned with new issues that arise in testing for two unit roots. The techniques described here are easy to generalise to the less likely case of more than two unit roots. Series that are generated with two unit roots involve the double summation of shocks, a process that tends to produce a smooth time series; in contrast, a series generated by a single unit root, which involves a single summation of shocks, is less smooth, although generally smoother than an I(0) series; the limiting case of the latter being the ‘spiky’ pattern produced by a white noise series.
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