It is known that Dickey-Fuller tests can lead to spurious rejections of the unit root nullhypothesis when the true generating process is difference-stationary with a break.Suppose now that an unsuccessful attempt is made to allow for a break, either throughmisplaced dummy variables or through...

We test for mean reversion in real exchange rates using data from five countries, four of whichhave experienced episodes of high inflation. We use monthly data for Argentina, Brazil, Chile,Colombia and Israel from 1972 to 1993 and find that in all cases except Brazil a stochastic unitroot model...