Australia and New Zealand CER Agreement and Breakpoints in Bilateral Trade: An Application of the Wald-Type Test

10 Pages Posted: 23 Aug 2008

See all articles by Kankesu Jayanthakumaran

Kankesu Jayanthakumaran

University of Wollongong - Department of Economics

Mosayeb Pahlavani

University of Wollongong - School of Economics and Information Systems

Date Written: August 20, 2008

Abstract

This paper investigates the impact of the Australia-New Zealand Closer Economic Relations (CER) Trade Agreement on bilateral trade of each member country by using historical time series data before and after the implementation of the CER. We determined the existence of endogenously determined structural breaks over the last 30 years. The Vogelsang (1997) Wald-type testing procedure is then used to test for the existence of a break at an unknown time in the trend function of the dynamic time series. The advantage of this model is that the procedure does not impose any restriction on the nature of the data since it allows for either trending or unit root series, or both, in the model. Using a Wald-type test for detecting breaks in the trend function of a univariate time series, we found that a significant trend break detected in New Zealand in 1988 coincided with the extensive review of the CER in 1988.

Keywords: Trend breaks, Wald-type testing, Australia and New Zealand integration

JEL Classification: C12, C22, C52, F13

Suggested Citation

Jayanthakumaran, Kankesu and Pahlavani, Mosayeb, Australia and New Zealand CER Agreement and Breakpoints in Bilateral Trade: An Application of the Wald-Type Test (August 20, 2008). Applied Econometrics and International Development, Vol. 6, No. 2, 2006, Available at SSRN: https://ssrn.com/abstract=1242102

Kankesu Jayanthakumaran (Contact Author)

University of Wollongong - Department of Economics ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Mosayeb Pahlavani

University of Wollongong - School of Economics and Information Systems ( email )

Wollongong, NSW 2522
Australia

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