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Australia and New Zealand CER agreement and breakpoints in bilateral trade: an application of the Wald-type test

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  • Jayanthakumaran, K.
  • Pahlavani, M.

Abstract

This paper investigates the impact of the Australia-New Zealand Closer Economic Relations (CER) Trade Agreement on bilateral trade of each member country by using historical time series data before and after the implementation of the CER. We determined the existence of endogenously determined structural breaks over the last 30 years. The Vogelsang (1997) Wald-type testing procedure is then used to test for the existence of a break at an unknown time in the trend function of the dynamic time series. The advantage of this model is that the procedure does not impose any restriction on the nature of the data since it allows for either trending or unit root series, or both, in the model. Using a Wald-type test for detecting breaks in the trend function of a univariate time series, we found that a significant trend break detected in New Zealand in 1988 coincided with the extensive review of the CER in 1988

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Bibliographic Info

Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 6 (2006)
Issue (Month): 2 ()
Pages:

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Handle: RePEc:eaa:aeinde:v:6:y:2006:i:2_14

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Related research

Keywords: Trend breaks; Wald-type testing; Australia - New Zealand integration;

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  1. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-70, July.
  2. repec:fth:eeccou:149 is not listed on IDEAS
  3. Evzen Kocenda, 2001. "Detecting Structural Breaks: Exchange Rates in Transition Economies," Development and Comp Systems 0012009, EconWPA.
  4. Jayant Menon, 1994. "Trade Liberalization and Intra-Industry Specialization: The Australian Experience," Centre of Policy Studies/IMPACT Centre Working Papers g-107, Victoria University, Centre of Policy Studies/IMPACT Centre.
  5. Rolf Färe & Shawna Grosskopf & Dimitri Margaritis, 2001. "Productivity Trends in Australian and New Zealand Manufacturing," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 34(2), pages 125-134.
  6. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
  7. Amelia Santos-Paulino & A. P. Thirlwall, 2004. "The impact of trade liberalisation on exports, imports and the balance of payments of developing countries," Economic Journal, Royal Economic Society, vol. 114(493), pages F50-F72, 02.
  8. Mosayeb Pahlavani & Abbas Valadkhani & Andrew C. Worthington, 2005. "The impact of financial deregulation on monetary aggregates and interest rates in Australia," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 1(3), pages 157-163, May.
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