Unit root tests with level shift in the presence of GARCH

The aim of this paper is to examine, using Monte Carlo experiments, the behaviour of unit root tests with a changing mean at an unknown date (Perron and Vogelsang, Journal of Business and Economic Statistics, 1992, 10, 301–320), in the presence of IGARCH errors. We find that the empirical sizes of the test statistics are significantly above the nominal ones and that distortions are considerably amplified by a conditional Studentʹs t distribution instead of a normal one.