Breakpoint Unit Root Tests on Select Macroeconomic Variables in Nigeria

Breakpoint Unit Root Tests on Select Macroeconomic Variables in Nigeria

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Bada Olatunbosun

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Alabi Nurudeen Olawale

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Breakpoint Unit Root Tests on Select Macroeconomic Variables in Nigeria

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Abstract

This paper is an investigation of the test of unit roots with trend break functions without a priori information in some selected macroeconomic variables in Nigeria. These variables are interest rate, inflation rate, exchange rate, real gross domestic product, and unemployment rate. Specifically, we employed the extended Augmented Dickey-Fuller test through innovational and additive outlier models. The truncation parameters were selected using the t-sig and F-sig general to specific recursive techniques. Unknown breakpoints were observed, which indicates a strong connection with the data. These dates represent critical periods of policy changes by the government and external shocks. The unit-root tests with trend functions suggest that structural breaks in the macroeconomic variable series are very important and significant when formulating economic policies. The breakpoints can be included in a VAR model as deterministic terms to further improve the forecast/prediction power without affecting the asymptotic properties of the test statistics involved in the analysis.

References

11 Cites in Article

Reference Format

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

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How to Cite This Article

bada_olatunbosun. 2021. \u201cBreakpoint Unit Root Tests on Select Macroeconomic Variables in Nigeria\u201d. Global Journal of Science Frontier Research - F: Mathematics & Decision GJSFR-F Volume 21 (GJSFR Volume 21 Issue F2).

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GJSFR Volume 21 Issue F2

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Crossref Journal DOI 10.17406/GJSFR

Print ISSN 0975-5896

e-ISSN 2249-4626

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GJSFR-F Classification MSC 2010: 97K80

Submission ReceivedFebruary 21, 2021
Peer Review Double Blind
Handling Editor
Accepted March 18, 2021
Published March 29, 2021

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April 16, 2021

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