Abstract
The theme of unit roots in macroeconomic time series have received a great amount of attention in terms of theoretical and applied research over the last three decades. Since the seminal work by Nelson and Plosser (1982), testing for the presence of a unit root in the time series data has become a topic of great concern. Granger and Newbold had put forward a new question ,which was called by spurious regression from 1974, then research on non-stationary is a hot topic. Because stationary time series and non-stationary time series come form different data generating processes, they have different contents, properties and analysis technique. The testing of stationary behavior of time series is a precondition to mathematical modeling. Testing for the presence of a unit root is that testing time series are stationary or non-stationary. Unit root process is one of non-stationary processes. The theories of unit root processes in financial time series have received a great amount of attention in terms of theoretical and applied research over decades.
This issue gained further momentum with Perron’s 1989 paper which emphasized the importance of structural breaks when testing for unit root processes. There is an error that traditional unit root tests are used for unit root process of time series with a possible change in its intercept or slope. The situation of exogenous structural break are subjective and if unit root processes of time series with a possible change in its intercept or slope aren’t in accord with the fact , the power of tests is false . The results of the simulation analysis are illustrated efficiently via an application, which is more effective than exogenously structural break tests
Key words: unit root stationary process structural break
