Cointegration, Structural Changes and the Relationship between Trade and Economic Growth in Tunisia

This paper examines the major determinants of GDP growth in Tunisia using quarterly time series data spanning from 1960 to 2003. The Tunisian economy has been subject to a multitude of structural changes and regime shifts during the sample period. Thus, time series properties of the data are first analyzed by Zivot-Andrews (1992) model. The empirical results based on this model indicate the presence of unit roots for all of the variables under investigation. Taking into account the resulting endogenously determined structural breaks; the Saikkonen and Luetkephol (2000) and Johansen and al (2001) cointegration approach is then employed to determine the long-run drivers of economic growth. This cointegration technique accommodates potential structural breaks that could undermine the existence of a long-run relationship between GDP growth and its main determinants. Empirical estimates based on Quintos (1995) and Johansen (1993) approches indicate that in the long-term, policies aimed at promoting various types of physical investment, human capital, trade openness and technological innovations will improve economic growth