On the practical problems of computing seasonal unit root tests

In this paper we explore the practical problems that can arise in computing the regression based testing procedure for unit roots in quarterly time-series processes suggested by Hylleberg et al. We use the illustrative case study of UK real consumers' expenditure on non-durable goods together with a Monte Carlo study. The evidence presented in this paper suggests that the Hylleberg et al. testing procedure is highly sensitive to both the form of deterministic components included in the test regression and to the lag structure adopted, the latter of which will tend to be under-fitted when pursuing conventional information based rules such as the Schwarz BIC criterion, or the sequential rule of Ng and Perron.