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Testing for Structural Breaks in Australia's Monetary Aggregates and Interest Rates: An Application of the Innovational Outlier and Additive Outlier Models

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Abstract

This paper employs all quarterly time series currently available to endogenously determine the timing of structural breaks for various monetary aggregates and interest rates in Australia over the last thirty years. The Innovational Outlier model (IO) and the Additive Outlier model (AO) are then used to test for nonstationarity. After accounting for the single most significant structural break, the results from both models clearly indicate that the null of at least one unit root cannot be rejected for almost all series examined. The structural breaks found coincide with important policy changes during the period of financial deregulation starting in the 1980s.

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  • Pahlavani, Mosayeb & Valadkhani, Abbas & Worthington, Andrew, 2005. "Testing for Structural Breaks in Australia's Monetary Aggregates and Interest Rates: An Application of the Innovational Outlier and Additive Outlier Models," Economics Working Papers wp05-02, School of Economics, University of Wollongong, NSW, Australia.
    • Handle: RePEc:uow:depec1:wp05-02
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    7. Perron, Pierre & Vogelsang, Timothy J, 1992. "Nonstationarity and Level Shifts with an Application to Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 301-320, July.
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    1. Salih ÖZTÜRK & Selin SAYGIN, 2020. "The Relationship between Real Per Capita Income, Foreign Direct Investment, Trade Openness and Carbon Emissions Under Structural Break in Turkey for the Period of 1974-2016," Sosyoekonomi Journal, Sosyoekonomi Society, issue 28(44).

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    Keywords

    Monetary aggregates; interest rates; Innovational Outlier Model; Additive Outlier Model;
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