TRADE REFORMS AND BREAKPOINTS IN AUSTRALIA’S MANUFACTURED TRADE: AN APPLICATION OF THE ZIVOT AND ANDREWS MODEL

Trade liberalization is expected to increase imports but also exports via reduced input costs and increased domestic competition. This paper investigates whether this is the case for Australian manufactured goods. We begin by briefly describing the trends in the effective rate of protection, imports and exports in Australia over the last 30 years and then investigate the existence of major structural breaks in the imports and exports series by applying the Zivot and Andrews (1992 )test, using annual time series data from 1968/69 to 2003/2004. We find that a significant structural break occurred for imports in 1988/1989, which coincides with the introduction of major trade liberalization policy. We also find a significant structural break for exports with the three-year lag in 1992/1993.