Unit Root Tests with Breakpoints in Eviews
Accounting for possible breakpoints in your data is very important. Unit root tests are biased toward a false unit root null when the data are trend stationary with a structural break.
In this tutorial you will learn the following:
- We will replicate Perron paper’s finding.
- I show you how to generate a stationary Ar(1) process in EViews and conduct unit root tests
- What happens if there is a sudden break in a stationary series? We check the unit root test in an Ar(1) with a break
- I teach you how to generate a dummy variable in EViews.
- We conduct the unit root test with breakpoints as in Perron
- How to deal with breaks.
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