IN SERBIA-AN ECONOMETRIC INVESTIGATION
1Vladimir Andrić2
Institute of Economic Sciences, Belgrade, Serbia Jelena Minović3
Institute of Economic Sciences, Belgrade, Serbia Ljubiša Andrić4
ITNMS, Belgrade, Serbia
OBJECTIVES
The objectives of the paper are: i) to detect major turning points in the dynamics of industrial minerals and rocks in Serbia between 1973 and 2015; ii) to assess whether, how and to what extent the dynamics of industrial minerals and rocks in Serbia was influenced by overall business cycle fluctuations; iii) to argue in favor of higher infrastructure spending in Serbia as the most effective tool for the revival of industrial minerals and rocks production
METHODOLOGY
We implement the ordinary least squares (OLS) change point regression methodology outlined in Bai and Perron (1998, 2003a, 2003b) to detect and model structural breaks in the dynamics of industrial minerals and rocks in Serbia between 1973 and 2015. In particular, we use a following 3-step algorithm to estimate linear OLS model with multiple structural changes: first, we specify the upper bound for the number of breaks M by setting the value of trimming percentage ϵ=15%; second, we test the null hypothesis of no structural break
1 This paper is a part of research projects number III47009 (European Integrations and
Socio-economic Changes in the Economy of Serbia on the Way to the EU) and OI179015 (Challenges and Prospects of Structural Changes in Serbia: Strategic Directions of Economic Development and Harmonization with the EU Requirements), financed by the Ministry of Education, Science and Technological Development of the Republic of Serbia.
2 Research Assistant, e-mail: [email protected] 3 Research Fellow, e-mail: [email protected] 4 Principal Research Fellow, e-mail: [email protected]
against the alternative of up to 5 potential breaks; 3) third, we estimate the change point regression model via OLS method by allowing for autocorrelated and heterogeneous disturbances across breaks.
RESULTS
Our multiple structural breaks tests identify 5 change points in the intercept and linear time trend of industrial minerals and rocks extraction: 1980, 1989, 1995, 2003 and 2009. The estimated break dates correspond to the major turning points of the business cycle fluctuations in Serbia between 1973 and 2015. In addition, estimated intercept and trend coefficients from an OLS model with multiple structural changes are in great accordance with major stylized facts of the business cycle in Serbia in the last 40 years. The results are preliminary, and they encompass only aggregates extraction, as in Andrić et al. (2017a, 2017b). Further investigation is in progress for other types of industrial minerals and rocks.
IMPLICATIONS
The main policy implications of our paper are: 1) the extraction of industrial minerals and rocks was largely affected by the overall economic activity in Serbia between 1973 and 2015; 2) the slowdown of activity in the extraction of industrial minerals and rocks is evident from the onset of the Great Recession; 3) the increase in infrastructure public spending can have an effect on the extraction of industrial minerals and rocks.
ORIGINALITY VALUE
We construct a novel time series data set for industrial minerals and rocks in Serbia between 1973 and 2015. Behrens et al. (2007) acknowledge how present data for industrial minerals and rocks are fragmentary and incomplete. We also present reduced form econometric estimates for the behaviour of industrial minerals and rocks, contrary to Humphreys and Biggs (1983) and Humphreys (1991). Humphreys and Biggs (1983) only provide descriptive statistical analysis in the case of UK between 1945 and 1980, while Humphreys (1991) provides the same type of analysis for the US between 1960 and 1989.
KEY WORDS
Industrial minerals and rocks, aggregates, Serbia, structural breaks, change point regression
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