Dickey and pantula (1987) suggusted a simple extensión of the basic procedureif more tan one

unit root is suspected. In essence , the methodology enfail nothing more than performing dickey
fuller test son successie diferences of (yt), when exactly one root is suspected, the dickey fuller
procedure is to estimate an equation such as

In contrast, if two roots are suspected, estimate the equation

Use the apprpriate statistic (ggggggggg dependding on the deterministic elements actually
incluted in the regresión) to determine whether gggg is significantly diferent from zero. If you
cannot rejecct the null hypothesis tht gggggg conclude thatthe gggg sequence es t(2) gggggg
does fiffer form zer, go on to determine whether there is a single unit root by estimating

Since there are not two unit roots, you should find that fffffff gggggg and/or fffff differ from
zero. Under the null hypothesis of a single unit root gggggggggggggggg under the alternative
hypothesis ggggggggg is stationary so that ggggggggg are bolh negative. Thus, estimate
(4.33) and use the dickey – fuller critical values to test the mull hypothesis gggggg if you
rejecctthis null hypothesis, you can conclude that ggggg is stationary.

As a rue of thumb , economic series do not need to be differenced more than two times.
However, in the odd case in which at most ggggg unit roots are suspccted, the procedure is to
first estimate

If gggg is stationary you should find that gggggg. If the df critical values for ggg are such
that it is not posible to rejcct the null of a unit root, you can accept the hipothesis that
gggggg contains fffff unit roots. If we rejecct this of exactly gggg unit roots, the next ste´p is
to test for gggggg roots by estimating

If both ggggggg differ from zero, rejcct the null hypothesis of gggg roots. You can use the
df statistics o test the null of exactly ggg unit roots if the ggggggg are both statistically
different from zero. If you can reject this null, the next step is to form

As long as it is posible to reject the null hypothesis that the varios values of the gggg are gggg,
continue foward the equation
Continue in this fashion until it is not posible to reject the ull of a unit root or until the gggg series
is shown to be stationary. Notice that this procedure is quite diferent from the sequential
testing for successively greaer numbers of unit root. Might seem tempting to test for a smple
unit root and, if the null cannot be rejectd go on to test for the presence of a second root. In
repeated samples. This method lends to select too few roots