LM threshold unit root tests

We build on the threshold unit root tests in Enders and Granger (1998) and develop tests based on Lagrange Multiplier (LM) unit root tests. The asymptotic properties are derived and finite sample properties are examined in simulations.

Research Highlights► We extend the Enders and Granger (1998) threshold unit root tests to the LM framework. ► Percentile threshold values are adopted so that a standard set of critical values can be utilized in each model. ► We find that the power of the LM threshold unit root tests compares favorably to the corresponding Dickey-Fuller version tests.