3.4 Unit root tests
Non-stationary data result in spurious regression, therefore testing for data stationarity is essential. There are several unit root tests which include the Dickey-Fuller test, the Augmented
Dickey-Fuller (ADF) and the Phillip-Perron test but the ADF test was used in this study because it corrects for serial autocorrelation in the residuals (Wooldridge, 2008). If the absolute ADF test statistic is greater than the critical values then the series under consideration is said to be stationary. Series found to contain unit roots are differenced until they are stationary.
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