MULTIPLE TREND BREAKS AND THE UNIT-ROOT HYPOTHESIS

Ever since Nelson and Plosser (1982) found evidence in favor of the un it-root hypothesis for 13 long-term annual macro series, observed unit -root behavior has been equated with persistence in the economy. Perro n (1989) questioned this interpretation, arguing instead that the ''ob served'' behavior may indicate failure to account for structural chang e. Zivot and Andrews (1992) restored confidence in the unit-root hypot hesis by incorporating an endogenous break point into the specificatio n. By allowing for the possibility of two endogenous break points, we find more evidence against the unit-root hypothesis than Zivot and And rews, but less than Perron.