Unit Root and Structural Break: Experience from the Indian Service Sector

Purba Roy Choudhury ()
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Purba Roy Choudhury: The Bhawanipur Education Society College

Chapter 18 in Analytical Issues in Trade, Development and Finance, 2014, pp 295-320 from Springer

Abstract: Abstract The purpose of this chapter is to analyse and examine the presence of unit root properties of the growth of the components ofIndia’s GDP at factor cost using annual data from 1950–51 to 2009–10. The paper tries to analyse the trends in the growth in India with special reference to the Indian service sector. The initial part of the paper undertakes the selective survey of literature. Next, the relative share of agriculture, industry and services in the gross domestic product(GDP) are analyzed for the Indian econiomy as a whole, along with the decomposition of service sectors in India. Along with traditional unit root tests like the Augmented Dickey-fuller and the Phillips Perron test, the procedure developed by Zivot and Andrews to test the null of unit root against the break stationary alternative are also used. These conventional unit root test results reveal that all variables are stationary. However, results from the Zivot Andrews test indicate all the growth series except transport, storage and communication are stationary with a single break. At the same time, the Zivot and Andrews test identifies endogenously the point of the single most significant structural break in every time series examined. Most interestingly, the single most significant break in the growth of the components of GDP in the Indian economy occurs at around 1965–66.

Keywords: Excess growth of services; Service sector growth; Zivot Andrews test; Tertiary sector; ICT sector; Service sector growth in India; Unit Root Test without structural break; Perron’s subjective procedure; ADF test; PP test (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/978-81-322-1650-6_18

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