Multiple structural breaks in Australia's macroeconomic data: an application of the Lumsdaine and Papell Test

Article

Layton, Allan P., Valadkhani, Abbas and Pahlavani, Mosayeb. 2005. "Multiple structural breaks in Australia's macroeconomic data: an application of the Lumsdaine and Papell Test." International Journal of Applied Econometrics and Quantitative Studies. 2 (3), pp. 19-32.
Article Title

Multiple structural breaks in Australia's macroeconomic data: an application of the Lumsdaine and Papell Test

ERA Journal ID18162
Article CategoryArticle
AuthorsLayton, Allan P. (Author), Valadkhani, Abbas (Author) and Pahlavani, Mosayeb (Author)
Journal TitleInternational Journal of Applied Econometrics and Quantitative Studies
Journal Citation2 (3), pp. 19-32
Number of Pages14
Year2005
Place of PublicationSantiago de Compostela, Spain
ISSN1698-4153
1988-0081
Web Address (URL)http://ideas.repec.org/a/eaa/ijaeqs/v2y2005i3_2.html
Abstract

This paper employs all available annual time series data to
endogenously determine the timing of structural breaks for 10 macroeconomic variables in the Australian economy. The ADF (Augmented Dickey and Fuller) test and the LP (Lumsdaine and Papell, 1997) test are used to examine the time series properties of the data. The ADF test results provide no evidence against the unit root null hypothesis in all ten macroeconomic variables. After accounting for the,two most significant structural breaks in the data
impacting on both the intercept and trend, the results from the LP test indicate that the null of at least one unit root is rejected for four of the variables under investigation at the 10 per cent level or better. We also found that the dates of structural breaks in most cases point to: (a) the oil/wages shock occurring in the 1973-1975 period, (b) the 1990-1991 recession; (c) the culmination of financial deregulation and innovation in the late 1980s; and (4) the 1997 Asian crisis.

Keywordsunit roots hypothesis; structural breaks; Australian economy
ANZSRC Field of Research 2020440499. Development studies not elsewhere classified
380112. Macroeconomics (incl. monetary and fiscal theory)
380205. Time-series analysis
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Byline AffiliationsQueensland University of Technology
University of Wollongong
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