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A revisit of the unemployment rate, interest rate, GDP growth and Inflation of Pakistan: Whether Structural break or unit root?

Author

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  • Sara Muhammadullah
  • Amena Urooj
  • Faridoon Khan

    (Pakistan Institute of Development Economics, Islamabad, Pakistan.)

Abstract

The study investigates the query of structural break or unit root considering four macroeconomic indicators; unemployment rate, interest rate, GDP growth, and inflation rate of Pakistan. The previous studies create ambiguity regarding the stationarity and non-stationarity of these variables. We employ Zivot & Andrews (1992) unit root test and Step Indicator Saturation (SIS) method for multiple break detection in mean. GDP growth and inflation rate are stationary at level whereas unit root tests fail to reject the null hypothesis of the unemployment rate and interest rate at level. However, Zivot and Andrew unit root test with a single endogenous break indicates that the unemployment rate and interest rate are stationary at level with a single endogenous break. On the other hand, the SIS method reveals that the series are stationary with multiple structural breaks. It is inferred that it is inappropriate to take the first difference of the unemployment rate and interest rate to attain stationarity. The results of this study confirmed that there exist multiple breaks in the macroeconomic variables considered in the context of Pakistan.

Suggested Citation

  • Sara Muhammadullah & Amena Urooj & Faridoon Khan, 2021. "A revisit of the unemployment rate, interest rate, GDP growth and Inflation of Pakistan: Whether Structural break or unit root?," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 3(2), pages 80-92, September.
    • Handle: RePEc:ani:irdjoe:v:3:y:2021:i:2:p:80-92
    DOI: https://doi.org/10.52131/joe.2021.0302.0027
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Step Indicator Saturation; Autometrics; Dummy Saturation model; Generalized Unidentified Model;
    All these keywords.

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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