Abstract
The discourse on the properties of macroeconomic time series has received a considerable interest in recent literature. This is because the presence of unit in a realization of a stochastic process implies that shocks to the time series have a persistent effect with policy implications. Hence, this paper investigates the unit root properties of ten Nigerian macroeconomic time series using quarterly data from 1981-2015. For comparison, first we apply the conventional augmented Dickey-Fuller unit root test to examine the null of a unit root in the ten macroeconomic series, and we proceed to examine the unit root properties using the Lagrange Multiplier (LM) endogenous unit root tests that account for the presence of one-break and two-break as proposed by Lee and Strazicich (2003, 2013). On employing the augmented Dickey-Fuller test that does not account for structural breaks, our empirical results indicate that the unit root null hypothesis cannot be rejected for nine of the ten series considered in the study. However, on utilizing the Lagrange Multiplier (LM) endogenous one and two structural breaks test, we reject the unit root null in favour of the one and two-break stationary alternative for six of the ten series (60% rejection) considered in our study. These results imply that unit root tests that do not account sufficiently for the presence of structural breaks lead to misleading inference. These findings have important implications for the macroeconomic policy-making, modeling and forecasting of the Nigerian economy. We therefore, recommend that structural breaks should be taken into account in the econometric analysis of Nigerian macroeconomic variables.