Testing for unit roots with breaks: Evidence on the great crash and the unit root hypothesis reconsidered

Luis C. Nunes, Paul Newbold, Chung Ming Kuan

Research output: Contribution to journalArticle

149 Citations (Scopus)

Abstract

Nelson and Plosser (1982), in a classic paper, failed to find strong evidence against the null hypothesis of a generating process with a unit autoregressive root for thirteen US macroeconomic time series. Perron (1989) claimed that such evidence was available for a majority of these series if the alternative hypothesis was of trend stationarity with a break in 1929. Zivot and Andrews (1992) treated the break date as endogenous, then finding strong evidence agcainst the null for a minority of these series. Our own analysis extends theirs by permitting a break under the null as well as the alternative hypothesis, and allowing for the sequential nature of the testing. Our empirical findings complete the circle. We find no strong evidence against the unit root hypothesis for any of the thirteen Nelson-Plosser series.

Original languageEnglish
Pages (from-to)435-448
Number of pages14
JournalOxford Bulletin of Economics and Statistics
Volume59
Issue number4
DOIs
Publication statusPublished - Nov 1997

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