Size and power properties of structural break unit root tests

In this article, we compare the small sample size and power properties of a newly developed endogenous structural break unit root test of Narayan and Popp (NP, 2010 ) with the existing two break unit root tests, namely the Lumsdaine and Papell (LP, 1997 ) and the Lee and Strazicich (LS, 2003 ) tests...

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Bibliographic Details
Published inApplied economics Vol. 45; no. 6; pp. 721 - 728
Main Authors Narayan, Paresh Kumar, Popp, Stephan
Format Journal Article
LanguageEnglish
Published London Routledge 01.02.2013
Taylor and Francis Journals
Taylor & Francis Ltd
SeriesApplied Economics
Subjects
Coefficients
Comparative analysis
Dummy
Econometrics
Einheitswurzeltest
Endogenous
Monte Carlo
Monte Carlo simulation
Power
Sample size
Structural analysis
structural breaks
Strukturbruch
Studies
Tests
Theorie
Unit root
unit root test
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ISSN0003-6846
1466-4283
DOI10.1080/00036846.2011.610752

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Summary:In this article, we compare the small sample size and power properties of a newly developed endogenous structural break unit root test of Narayan and Popp (NP, 2010 ) with the existing two break unit root tests, namely the Lumsdaine and Papell (LP, 1997 ) and the Lee and Strazicich (LS, 2003 ) tests. In contrast to the widely used LP and LS tests, the NP test chooses the break date by maximizing the significance of the break dummy coefficient. Using Monte Carlo simulations, we show that the NP test has better size and high power, and identifies the structural breaks accurately. Power and size comparisons of the NP test with the LP and LS tests reveal that the NP test is significantly superior.
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ISSN:0003-6846
1466-4283
DOI:10.1080/00036846.2011.610752