The COVID-19 outbreak that has occurred has caused governments throughout the world
to give orders that have “closed” their economies to one degree or another. This raise the
possibility of a structural break in economic data. Write a short research essay on the
effects of structural breaks on testing for unit roots. I am envisioning no more than one
page, using a 12-point font. Your essay should cover the following points:
• Provide a definition of “structural break”;
• Explain why a structural break creates a problem in testing for unit roots;
• Explain how unit root tests can be adapted or adjusted to allow for structural breaks.
Do structural breaks require entirely different unit root tests? Make sure you show
what the unit root test looks like in the presence of a structural break.
You must include references, but I am not requiring footnotes. You must include links to
documents you have consulted. make sure that the links work before submitting
your essay!
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