This paper employs all quarterly time series currently available to determine endogenously the time of structural breaks for three monetary aggregates—the long- and short-term interest rates as well as the consumer price index—in Australia using the ZA (Zivot and Andrews, 1992) test and the LP (Lumsdaine and Papell, 1997) test. After accounting for the single most significant structural break, the results from the ZA test (model C) provide no evidence against the unit root null hypothesis for all series examined. However, when two structural breaks are incorporated in the testing procedure within the framework proposed by LP (i.e., model CC) the test results indicate that the unit root hypothesis is indeed rejected for four out of six of the variables under investigation at the 5% level. The estimated two structural breaks were found to be statistically significant in five out of six variables. The dates of structural breaks in most of the cases point to: (a) The 1973 oil shock; (b) The culmination of financial deregulation and innovation in the late 1980s; (c) The 1990-91 recession; and (d) The launch of the 1996 Wallis Inquiry into financial system.
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Volume (Year): V (2007) Issue (Month): 1 (February) Pages: 19-29 Download reference. The following formats are available: HTML
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Handle: RePEc:icf:icfjmo:v:05:y:2007:i:1:p:19-29
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