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Structural Breaks and Unit Roots in Indian Macroeconomic Variables

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  • K.G. SURESH

    (IBS-Hyderabad, IFHE University, Hyderabad, India)

  • C.S. SHYLAJAN

    (IBS-Hyderabad, IFHE University, Hyderabad, India)

Abstract

This study intends to examine the presence of structural breaks in Indian GDP, GNP and its various components. We have used recently developed unit root test suggested by Narayan and Popp (2010), which can identify two structural breaks. It is found that the extensive reforms in the 1990’s affected the growth of GDP, GNP and sectors such as trade, Finance and public administration while agriculture and manufacturing sectors are unaffected. The 1980’s initial reforms have impact on GDP, GNP, Finance and public administration. It is found that post 1990 reforms implemented in India failed to have an effect on agriculture and manufacturing. This necessitates further reforms in agriculture and manufacturing sector to accelerate the growth in these sectors. This is the first study to use the Narayan and Popp (2010) unit root test with two structural breaks to check the stationarity of the economic times series and identify the breaks in Indian context.

Suggested Citation

  • K.G. Suresh & C.S. Shylajan, 2015. "Structural Breaks and Unit Roots in Indian Macroeconomic Variables," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(605), W), pages 145-150, Winter.
    • Handle: RePEc:agr:journl:v:xxii:y:2015:i:4(605):p:145-150
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    References listed on IDEAS

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    1. Junsoo Lee & Mark C. Strazicich, 2013. "Minimum LM unit root test with one structural break," Economics Bulletin, AccessEcon, vol. 33(4), pages 2483-2492.
    2. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    3. Paresh Kumar Narayan & Stephan Popp, 2010. "A new unit root test with two structural breaks in level and slope at unknown time," Journal of Applied Statistics, Taylor & Francis Journals, vol. 37(9), pages 1425-1438.
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    5. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
    6. Schmidt, Peter & Phillips, C B Peter, 1992. "LM Tests for a Unit Root in the Presence of Deterministic Trends," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 257-287, August.
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