Identifying Structural Breaks in the Lebanese Economy 1970-2003: An Application of the Zivot and Andrews Test

Charles Harvie (), Mosayeb Pahlavani () and Ali Salman Saleh ()
Additional contact information
Charles Harvie: University of Wollongong, http://business.uow.edu.au/econ/who/index.html
Mosayeb Pahlavani: University of Wollongong, http://www.uow.edu.au/index.html
Ali Salman Saleh: Monash University Malaysia

Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia

Abstract: During the 1960s and early 1970s the Lebanese economy was characterized by low inflation, high growth, sizeable balance of payments surpluses and small public sector deficits, which made it a highly attractive business centre. During this period the country was described as the Switzerland or Paris of the East. This macroeconomic stability did not last long, however, as the economy subsequently underwent fundamental structural changes during most years after the mid 1970s. The aim of this paper is to identify the timing of major structural breaks in the Lebanese economy by applying the Zivot and Andrews (ZA) (1992) procedure, using annual time series data spanning the years from 1970 through 2003. The empirical results from the ZA model, which endogenously identifies the most significant structural breaks in each of the macroeconomic variables, clearly show that the null hypothesis of at least one unit root could be rejected for some of the variables under investigation. In other words, some of the variables, which contain a unit root based on the conventional unit root test, become stationary after taking into account the existence of potential structural breaks in the series . The results are statistically significant and the endogenous structural breaks identified using this methodology also coincides with periods of major economic shocks to the Lebanese economy. More specifically, most of the structural changes are associated with: the years of the Civil War in Lebanon, which started in 1975; the post 1982 era which started with the Israeli invasion of Beirut in 1982; the deep recession in 1983-84; and the adverse effects of the 1988-89 currency depreciation on inflation and the real economy.

Keywords: Structural break; unit root test; Lebanon economy (search for similar items in EconPapers)
JEL-codes: C12 C22 C52 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2006
New Economics Papers: this item is included in nep-cwa
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.uow.edu.au/content/groups/public/@web/@ ... ts/doc/uow012215.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:uow:depec1:wp06-02

Access Statistics for this paper

More papers in Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Peter Siminski ( this e-mail address is bad, please contact ).