Testing for Structural Breaks in the Korean Economy 1980-2005: An Application of the Innovational Outlier and Additive Outlier Models

Charles Harvie () and Mosayeb Pahlavani ()
Additional contact information
Charles Harvie: University of Wollongong, http://www.uow.edu.au/commerce/econ/who/index.html
Mosayeb Pahlavani: University of Wollongong, http://www.uow.edu.au

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

Abstract: This paper employs quarterly time series data to endogenously determine the timing of structural breaks for various macroeconomic variables in Korean economy. The Innovational Outlier (IO) as well as Additive Outlier models (Perron, 1997) are then used to test for non-stationarity of the Korean macroeconomic data. After accounting for the single most significant structural break, the results from the (AO) model clearly indicate that the null of at least one unit root cannot be rejected for all of the series under investigation. This finding is consistent with our finding based on the conventional unit root test. However, by applying the IO procedure in the presence of a structural break we find the interesting result that two of the variables under investigation become stationary. The timing of structural breaks for key macroeconomic data under the IO and AO approaches appear to be quite different. Using the IO approach seven of the ten macroeconomic variables focused upon have important structural breaks corresponding with the timing of the Asian financial crisis of 1997. On the other hand, using the AO approach, only one of the ten variables appears to have a structural break related to the Asian financial crisis, while the remaining nine variables have quite diverse structural breaks that depend on key policy changes or other factors contributing to economic turbulence.

Keywords: structural break; unit root test; and Korean economy (search for similar items in EconPapers)
JEL-codes: C12 C22 C52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-sea
Date: 2006
View list of references

Downloads: (external link)
http://www.uow.edu.au/content/groups/public/@web/@ ... ts/doc/uow012222.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: http://EconPapers.repec.org/RePEc:uow:depec1:wp06-09

Access Statistics for this paper

More papers in Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia
Address: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Contact information at EDIRC.
Series data maintained by Ed Wilson ().