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on the model with a drift only. The unit root null hypothesis is rejected at conventional levels
for all series in first differences.

Table 2. DF-GLS unit root tests on the first differences of series

Variables

Specification

Lags

Test statistic

∆lnIPI

constant

4

- 1.986

∆lnPPI

constant

2

- 3.680

∆lnM1A

constant

1

- 6.633

∆lnXREURO

constant

1

- 6.753

The critical values for 0.95 (0.99) confidence levels with constant are -1.944 (-2.592), with constant and trend
are -3.074 (-3.633). The Akaike Information Criteria was used to determine the lag length.

Because the graphical analysis suggests the possibility of structural breaks, that are not
accounted for by the DF-GLS tests, the Zivot-Andrews unit root test in the presence of
structural breaks is used to double-check the series (table 3).

Table 3. Andrews - Zivot unit root tests

Variable

Structural break

Lags

Possible break
date

Test statistic

lnPPI

intercept only

0

2001:06

- 3.783

trend only

0

2000:09

- 2.506

both

0

2001:06

- 3.825

lnIPI

intercept only

1

2003:06

- 2.557

trend only

1

1998:03

- 2.413

both

1

2001:05

- 2.865

lnXREUR

O

intercept only

2

2001:05

- 3.717

trend only

2

1998:09

- 3.278

both

2

1998:08

- 3.263

lnM1A

intercept only

0

2003:07

- 2.208

trend only

0

1998:03

- 3.655

both

0

1998:08

- 2.876

The critical values for 0.95 (0.99) confidence levels in case of a structural break in the intercept only, are -4.80
(-5.34), trend only -4.42 (-4.93), and both -5.08 (-5.57). The Schwarz Bayesian criterion was used to determine
the lag length.

10



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