Australia and New Zealand CER Agreement and Breakpoints in Bilateral Trade: An Application of the Wald-type Test
AbstractThis 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 InfoPaper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp06-06.
Length: 12 pages
Date of creation: 2006
Date of revision:
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Trend breaks; Wald-type testing; Australia-New Zealand integration;
Other versions of this item:
- Jayanthakumaran, K. & Pahlavani, M., 2006. "Australia and New Zealand CER agreement and breakpoints in bilateral trade: an application of the Wald-type test," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(2).
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
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