On LM‐type tests for seasonal unit roots in the presence of a break in trend

Abstract

This article proposes tests for seasonal unit roots allowing for the presence of a break in the trend slope occurring at an unknown date. In particular, new LM‐type tests are derived based on the framework introduced by Hylleberg et al. (1990). Null asymptotic distributions are derived for the no break case as well as when a break is present in the data‐generating process and a Monte Carlo investigation on the finite sample size and power performance of the new procedures is presented.