The Perron test is the most commonly applied procedure to test for a unit root in the presence of a structural break of unknown timing in the trend function. Deriving the Perron-type test regression from an unobserved component model, it is shown that the test regression in fact is nonlinear in...

Present value calculations require predictions of cash flows both at near and distant future points in time. Such predictions are generally surrounded by considerable uncertainty and may critically depend on assumptions about parameter values as well as the form and stability of the data...

The present paper considers Dickey-Fuller-type unit root tests which account for a structural break occurring at an unknown point in time. The break is modelled by an innovational outlier approach. Provided that the break date is estimated correctly, the exact invariance to a mean and a slope...