Testing for Structural Breaks in Australia's Monetary Aggregates and Interest Rates: An Application of the Innovational Outlier and Additive Outlier Models

Mosayeb Pahlavani, Abbas Valadkhani () and Andrew Worthington ()
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Mosayeb Pahlavani: University of Wollongong, http://www.uow.edu.au/commerce/econ/who/index.html
Abbas Valadkhani: University of Wollongong, http://www.uow.edu.au/commerce/econ/who/index.html
Andrew Worthington: University of Wollongong, http://www.uow.edu.au/commerce/econ/who/index.html

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

Abstract: This paper employs all quarterly time series currently available to endogenously determine the timing of structural breaks for various monetary aggregates and interest rates in Australia over the last thirty years. The Innovational Outlier model (IO) and the Additive Outlier model (AO) are then used to test for nonstationarity. After accounting for the single most significant structural break, the results from both models clearly indicate that the null of at least one unit root cannot be rejected for almost all series examined. The structural breaks found coincide with important policy changes during the period of financial deregulation starting in the 1980s.

Keywords: Monetary aggregates; interest rates; Innovational Outlier Model; Additive Outlier Model (search for similar items in EconPapers)
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Date: 2005
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