Structural Changes in the Iranian Economy: An Empirical Analysis with Endogenously Determined Breaks

This paper employs annual time series data (1960-2003) and the ZA (Zivot and Andrews, 1992) and the LP (Lumsdaine and Papell, 1997) approaches to determine endogenously the more likely time of major structural breaks in various macroeconomic variables of the Iranian economy. We have considered the presence of one and two unknown structural breaks in the data. The results obtained from these two approaches are consistent in that the time of one structural break in eight out of the ten variables examined in the paper is the same. The resulting structural breaks coincide with important phenomena in the economy such as the 1974 oil shock, the 1979 Islamic revolution, the Iraqi war or the implementation of the exchange rate unification policy in 1993 in the case of the official exchange rate.