seasonal unit roots structural breaks spurious rejections
This paper analyses additive outlier and innovational outlier tests for seasonal unit roots when
seasonal mean shifts occur under the null hypothesis. When the magnitude of the breaks is
large, simulation evidence reveals that, for three of the four testing procedures considered, the
endogenously determined break point can be incorrectly estimated, resulting in spurious
rejections of the null. A simple modification to one of the testing approaches is proposed
which achieves a substantial improvement in test size.