Structural Break Unit Root Research Articles

The effect of natural resources and economic factors on energy transition: New evidence from China

Recently, energy transition is an essential element for global development and needs the attention of recent researchers and policymakers. Thus, the present research investigates the impact of natural resources (total natural resources rent and natural gas rent) and economic factors (energy import, economic growth, and population growth) on the energy transition in China. Secondary data were collected from world development indicators (WDI) from 1971 to 2019. The Augmented Dickey-Fuller (ADF) test, Phillips–Perron (PP) test, Kwiatkowski–Phillips–Schmidt–Shin (KPSS) and “zivot-andrews structural break unit root” test was also utilized to check for stationarity among the autoregressive distributed lag model (ARDL) along with the error correction model (ECM) were used to examine the relationships between constructs. The results found that natural resources (total natural resources rent and natural gas rent) and economic factors (energy import, economic growth, and population growth) have a positive association with energy transition in China. The study concluded that energy transition is the essential requirement due to high usage of natural resources and high economic development. These results are helpful for energy sector regulators when formulating the rules and regulations related to energy transition in the country.

Does overseas eco‐friendly innovation collaboration matter for environmental quality sustainability in India?

AbstractThe nexus between technological innovations and environmental quality has been much discussed in the field of energy economics and policy. However, the role of overseas eco‐friendly innovation collaboration on environmental quality in India remains unaddressed. In such a line, our study raises the question of whether overseas eco‐friendly innovation collaboration and total technological innovations collaboration are important towards health protection of the natural environment in India. This motivates us to study their effects on India’s carbon dioxide emissions function in the presence of energy consumption and economic growth as important control variables. The usage of annual data from 1985 to 2016 permits us to use traditional and structural break unit root tests before the application of ARDL model to evaluate the long‐run relationship between the variables. Besides confirming the long‐run relationship among the variables, we find that eco‐friendly innovation and total innovation collaborations drive health of the natural environment while energy consumption impedes it. The adverse effect of economic growth on environmental quality becomes ineffective. These findings are robust to the usage of alternative techniques, urging climate policymakers in India to house greater overseas eco‐friendly innovation collaboration with other advanced and emerging economies to drive environmental quality sustainability in the long run.

A Symmetry and Asymmetry Investigation of the Nexus Between Environmental Sustainability, Renewable Energy, Energy Innovation, and Trade: Evidence From Environmental Kuznets Curve Hypothesis in Selected MENA Countries

The motivation of the study is to gauge the role of renewable energy consumption (REC), energy innovation (EI), and total trade (TR) on environmental sustainability (ES) in selected MENA (Middle East and North Africa) countries for the period 1980–2018 under the assumption of environmental Kuznets curve (EKC). The study implemented several econometrical tools, including structural break unit root test, Bayer–Hanck combined cointegration test, autoregressive distributed lag (ARDL), nonlinear ARDL, and Granger causality test under error correction term. Variables properties test detected that all the variables are stationary after the first difference but neither exposed to stationary after the second difference. The test statistics of the combined cointegration test documented a long-run association between ES, RE, EI, and TR, which is valid for both countries concerned. Regarding EKC concern, study findings with ARDL and nonlinear ARDL validated the EKC hypothesis for Tunisia and Morocco. Finally, the direction causality test documented unidirectional causality between renewable energy and ES, trade and ES, but the feedback hypothesis holds between EI and ES. We can advocate for specific sectoral environmental reforms in Tunisia and Morocco and suggest continuous environmentally friendly technologies by combining study findings. At the same time, subsidies on nonrenewable energy should be reduced, and green trade policies to help advance sustainable development should be implemented.

A validity of environmental Kuznets curve under the role of urbanization, financial development index and foreign direct investment in Pakistan

PurposeThis research aims to inspect the existence of the “environmental Kuznets curve” (EKC) in the presence of foreign direct investment (FDI), financial development (FD) and urbanization throughout 1972–2018 for Pakistan.Design/methodology/approachFor time series analysis, Phillips and Perron (PP) and Augmented Dickey–Fuller (ADF) unit root tests are used to confirm the level of integration. For robustness, Kim and Perron (2009)’s structural break unit root test is employed, which identifies the order of integration in the presence of structural break years. Further, combined cointegration analysis is performed to confirm the existence of a long-run association between underlying variables. Furthermore, autoregressive distributed lag (ARDL) analysis is employed for the robustness of the cointegration approach.FindingsThe cointegration analysis confirms the existence of a long-run association among variables. The authors find a positive and significant impact of urbanization, FD and foreign development on environmental degradation in the long run. Similarly, only FDI increases environmental degradation in the short run. In addition, the authors find an inverted U-shape relationship between economic growth and environmental quality which, further, confirms the presence of EKC in Pakistan.Originality/valueThis research contributes to applied economics in many ways: the combined effect of urbanization, FD, FDI and economic growth on carbon dioxide (CO2) emission is checked simultaneously. To avoid ambiguity, this study constructs the FD index through the principal component analysis (PCA). Moreover, the role of structural breaks has been considered through the analysis. Novel Bayer-Hanck combined cointegration analysis is employed to detect the existence of long-run relationships among underlying variables.

The Nexus between Agricultural Productivity, Oil Prices, Economic Growth, and Financial Development in the USA

Purpose. The study aims to examine the nexus between agricultural productivity by connecting oil prices, economic growth, and financial development. Design/Methodology/Approach. A newly formulated ARDL model was used to estimate an agricultural productivity nexus model using annual time-series data from 1962 to 2016. Innovation and additive structural break unit root tests were applied to determine the existence of unit roots, and the results reaffirmed that all the variables were stationary at first difference. The Chow Breakpoint test was applied to confirm a structural break in the year 2008 caused by the effects of the 2008 financial crisis. Findings and Implications. The results depicted a long-run relationship linking agricultural productivity, oil prices, economic growth, financial development and a financial crisis. The results also showed that financial development and economic growth have positive effects on agricultural productivity. The empirical findings further suggested that an increase in oil prices and the prevalence of a financial crisis have severe adverse effects on agricultural productivity. Originality. The study provides a novel viewpoint of agricultural productivity by connecting oil prices, economic growth, and financial stability and development. The study successfully demonstrated that the financial sector and oil price stability are pivotal for enhancing agricultural productivity initiatives. This study highlights the policy implications of the estimated results for policymakers seeking to boost agricultural productivity by addressing economic misfortunes induced by oil shocks and a financial crisis.

Financial development and natural resources. Is there a stock market resource curse?

This study empirically investigates the financial resource curse, particularly the stock market resource curse, using data from the period 2002-Q1 to 2018-Q4, by considering the natural resource rents on the banking development index, stock market development index, and financial development index for Malaysia, a country that is claimed to evade the resource curse. In addition to economic growth, institutional quality is the primary concern in the resource-finance literature and is also considered in the nexus by applying the latest econometric techniques. This study applied the Fourier ADF unit root test and Fourier GLS in addition to the structural break unit root test for cointegration. The recently developed Bootstrapped ARDL has been applied to determine the long-run relationship. Additionally, the robustness of the BARDL is carried out by the recently proposed Fourier ARDL. Moreover, the long-run elasticity has been estimated using Dynamic Ordinary Least Square (DOLS). Further, the variables’ casual interaction is investigated using the novel single Fourier frequency and cumulative Fourier frequency approach. This study reveals new and robust empirical findings demonstrating the financial resource curse in the banking sector. However, the study found a significant positive relationship between natural resources and stock market development, thus validating the stock market resource blessing hypothesis in addition to the overall financial resource blessing. Economic growth is positively related to banking and stock market development. Furthermore, a negative relationship was shown between institutional quality and stock market development. A bidirectional relationship exists between institutional quality and natural resources as well as between natural resources and economic growth. Natural resource revenue can boost economic growth by efficiently channelling the windfall revenue through banks and the stock market in strengthening the institutional quality.

Clean energy investment and financial development as determinants of environment and sustainable economic growth: evidence from China.

Environmental sustainability has become one of the most common phrases in discussions about climate change. This study examines the impact of clean energy investment and financial development on environmental sustainability and China's economic growth, using manufacturing value-added and urbanization as moderator variables from 1970 to 2016. We used advanced econometric methodologies for empirical estimations, used structural break unit root tests, fully modified least square, dynamic least square, and robust least square multiple regressions for long-run estimates. Overall, the results determine that clean energy investment is negatively associated with CO2 emissions and ecological footprint while positively associated with China's economic growth. Financial development, manufacturing value-added, and urbanization are positively associated with CO2 emissions, ecological footprint, and China's economic growth. Moreover, clean energy investment improves environmental sustainability at the expense of economic growth. Financial development, manufacturing value-added, and urbanization encourage economic growth at the expense of environmental sustainability. We argued that the local governments play a critical role in lifting the outstanding barriers to cleaner energy investment, addressing disincentives, including pricing carbon dioxide emissions, reforming inefficient nonrenewable fossil fuel subsidies, and addressing regulatory and market rigidities that can undesirably affect the attractiveness of clean energy investment. Policymakers are suggested to encourage green finance strategy for the financial sector to broader sustainable development objectives. At the heart of green manufacturing, industrialization policies are needed to integrate diverse intentions, like inclusive growth, environmental protection, and productivity through a wider range of economic, social, and environmental policy frameworks suitable for decoupling growthfrom social and environmental unsustainability.

Environmental quality and the asymmetrical nonlinear consequences of energy consumption, trade openness and economic development: prospects for environmental management and carbon neutrality.

Economic expansion gives rise to modern and energy-efficient technologies and, thus, contributes to a decline in energy usage. Developing countries, including Pakistan, require tremendous efforts to sustain economic growth. However, to attain economic growth, these countries have to cope with greenhouse gas (GHG) emissions and other environmental problems. This research focuses primarily on the asymmetric impacts of energy consumption and economic growth on Pakistan's environmental quality. Accordingly, secondary data spanning from 1971 to 2018 was used, and carbon dioxide emission (CO2) was considered a target variable (a proxy for environmental quality), whereas energy consumption (E) and gross domestic product (GDP) as a proxy for economic growth, and trade accessibility (TR) and foreign direct investment (FDI) as control variables. The nonlinear autoregressive distributed lag (NARDL) approach is used to verify the asymmetric co-integration between the variables selected. Moreover, to examine data stationarity and nonlinearity, we used the Zivot-Andrews structural break unit root and BDS tests, respectively. The findings confirmed the asymmetric and symmetric co-integrations among the considered variables. In addition, the causality analysis reveals that only negative shocks to TR have an effect on CO2 emissions. Similarly, negative shocks to FDI asymmetrically cause CO2 emissions. Meanwhile, GDP symmetrically affects CO2 emissions. Finally, a neutral causal response was observed between E and CO2 emissions. These findings have policy implications in terms of environmental management and carbon neutrality, and they serve as a baseline for future research.

A Dynamic Linkage between Financial Development, Energy Consumption and Economic Growth: Evidence from an Asymmetric and Nonlinear ARDL Model

Developing countries, including Pakistan, need a considerable effort to withstand economic growth; however, these countries have to cope with greenhouse gases emission and other environmental concerns. Financial advancement gives rise to modern, sometimes even innovative and energy-efficient technologies and, thus, contributes to a decline in energy usage among market entities: organizations and households. The current study explores the nonlinear asymmetric relationship between economic growth (Y) and the selected exogenous variables in Pakistan by incorporating time series data spanning from 1971 to 2016. Economic growth was considered as a target variable, while energy consumption (EC), electric power consumption (EPC), financial development (FD), and energy imports (EM) were considered independent variables. To investigate cointegration among the given variables, a nonlinear ARDL bound testing approach was employed. BDS independence test was used to check the nonlinearity, and a structural break unit root test was used for testing data stationarity. The findings confirm the presence of co-integration in the selected variables. A symmetric unidirectional significant causality exists running from EPC to Y, while a bidirectional symmetric causality was found between FD and Y. In contrast, any negative shocks in EPC, FD, and EM were found to have a positive asymmetric effect on Y. Meanwhile, a neutral effect was found between EC and Y. The outcomes of this study can provide guidelines for future researchers and policymakers.

Does governance quality matter for the development of financial institutions in Pakistan?

PurposeGovernance quality has been a dominant factor to formulate policies for the development of financial institutions in the world. Therefore, this study aims to explore the impact of governance quality on financial institutions along with globalization in the case of Pakistan.Design/methodology/approachTime series data from 1996 to 2018 are considered for analysis. The NG-Perron is applied to check the order of integration. In addition, Kim and Perron (2009) structural break unit root test is used to identify break years. The autoregressive distributive lags (ARDL) bound testing approach is used to detect the long-run association among governance quality, financial institutions and globalization.FindingsThe results of unit root analysis show that all series are stationary at a different level of integration, I(0)/I(1). However, the long-run association is detected in the presence of break years. The authors find a positive impact of governance quality to determine financial institutions in the long-short-run. Similarly, globalization also enhances financial institutions but only in long run.Originality/valueThis study fills the gap in the economic literature by exploring the linkages between the financial institution and disaggregated governance indicators in the case of Pakistan. Moreover, a role of structural break is also captured during analysis. This study also opens some new insights for policymaking.

Technological development, financial development, and economic growth in India: Is there a non-linear and asymmetric relationship?

PurposeThe main purpose of the present research is to analyze the relationship between technological development, financial development and economic growth in India in a non-linear and asymmetric framework.Design/methodology/approachThe study employs the nonlinear autoregressive distributed lags model (NARDL) and Hetemi J asymmetric causality tests to explore nonlinearities in the dynamic interaction among the variables. The stationarity properties of data are checked by using Ng–Perron and ADF structural break unit root tests. The unit root test confirms that the variables are non-stationarity in level and are differenced stationary.FindingsThe study finds that there is a cointegrating relationship between technological development, financial development and economic growth in the long run. The findings suggest that a positive shock in technological development increases economic growth (coefficient value 1.497 at 1% significance level) and a negative shock will harm economic performance (coefficient value −0.519 at 1% significance level). A long-term positives shock in financial development boosts the economy (coefficient value 1.08 at 5% significance level) and negative shock hampers the economic performance (coefficient value −1.09 at 5% significance level). The asymmetric causality test result confirms bi-directional causality between technological development and economic growth and unidirectional causality from negative economic growth to negative technological development and bi-directional causality between economic growth and financial development, unidirectional negative financial development to economic growth.Research limitations/implicationsThe results of this research can significantly facilitate stakeholders and policymakers in devising short-term as well as long-term policies for financial development and technological innovation to achieve sustainable long-run economic growth in India.Originality/valueThis paper is the first of its kind to empirically examine the cointegrating and causal relationship between technology, financial development and economic growth in India using non-linear asymmetric cointegration and causality tests.

Türkiye’de Sektör ve Kaynak Bazlı Enerji Kullanımları Yakınsıyor mu? Panel TAR ve Çoklu Kırılmalı Birim Kök Bulguları

Alternative solutions such as green growth, sustainable growth and increasing the share of renewable resources in energy use are proposed to eliminate the environmental pressure caused by fossil fuels. Based on this, in this study, a possible convergence relationship among the energy sources on a sectoral basis, and if so, whether this relationship is realized through fossil or renewable resources are empirically tested in the period of 1970-2017 for Turkey where sectoral transformations have taken place. Panel TAR (Threshold Autoregressive Models) data analysis findings show that there is no convergence relationship between the relevant sectors under the linear model, but there is a partial convergence under two regimes with different forms. In addition, the findings of Lumsdaine-Papell multiple structural breaks unit root analysis provide evidence that this partial convergence is realized through fossil fuels used in the relevant sectors. Renewable resources do not show convergence in any sector due to the presence of limited use areas within the sectors. This finding is considered as an indicator that the renewable energy policies and incentives in Turkey are insufficient in practice.

Exploring the relationship between carbon dioxide emissions, urbanisation and financial deepening for Turkey using the symmetric and asymmetric causality approaches

This paper investigates the association among carbon dioxide emissions, electricity consumption, capital, financial deepening and urbanisation using data from 1968 to 2013 collected from the World Bank for Turkey. Further, this study applies single- and bi-endogenous structural break unit root approach in addition to the Ng and Perron (2001) to explore the integration order of the series. The bounds test is adopted to analyse the long-run connection among the variables. The robustness of the bounds test was further investigated using the Bayer–Hanck (Bayer and Hanck, Journal of Time Series Analysis 34:83–95, 2013) combined cointegration method. The long-run effects identified the evidence of an inverted U-shaped association among carbon dioxide and urbanisation. This suggests that rapid urbanisation increases the levels of pollution in the initial stages of development. However, after reaching a threshold point, urbanisation reduces environmental pollution. Financial development, electricity use and capital affect COE significantly and positively in both the short and long run, while GDP has a positive and insignificant effect. Additionally, the causal relationships among the variables are identified using the symmetric and asymmetric causal techniques. The outcomes of the causal results showed that financial deepening, urbanisation and electricity use are causing environmental pollution in the short run in the symmetric causality, while CO2 is causing financial development based on the asymmetric causality. The findings suggest that green technologies should be adopted. Further, the use of renewable energy must be ensured for generating the electricity as it will facilitate a reduction in the COE.

An asymmetric analysis of the impacts of energy use on carbon dioxide emissions in the G7 countries.

The foremost theme of the paper is to explore the asymmetric/symmetric impact of energy consumption on the carbon dioxide emission of G7 countries (Germany, Canada, USA, Italy, France, Italy, UK, and Japan). The nonlinear autoregressive distributed lag is used to measure asymmetric/symmetric cointegration by using annual data of G7 countries from 1965 to 2019. The augmented Dickey-Fuller and structural break unit root test is employed to measure the stationarity in variables while the Brock, Dechert, and Scheinkman test is used for measuring nonlinearity and the Wald test is used to figure out short- and long-run asymmetries/symmetries, respectively. The estimated findings of the nonlinear autoregressive distribution lag model show a significant effect of energy use on the ecological footprint. The asymmetric causality test provides evidence of unidirectional, bidirectional, and asymmetrical/symmetrical causality among the variables of G7 nations. The finding of the study suggested policy for the government of Canada and France to use coal instead of oil and gas while the USA, Germany, Italy, UK, and Japan are required to consume gas as compared to oil and coal. Similarly, the study also suggests using modern technology, renewable energy, and preventive measurement for ensuring environmental betterment.

Does crime-tourism nexus hold for Pakistan?

PurposeThe primary objective of this study is to investigate the linkage of tourism and crime for Pakistan along with exchange rates, terrorism and domestic prices in the presence of structural breaks over the period 1984–2017.Design/methodology/approachThe order of integration is tested through ADF and PP unit root tests. The robustness of unit root test is testified via structural break unit root test. Furthermore, the authors use Bayer and Hanck (2013) combined cointegration test to confirm the existence of a long-term theoretical relationship among the variables. For the robustness of cointegration analysis, the authors also employ ARDL bound testing in the presence of structural break years. Moving forward, the authors apply VECM Granger causality to find out the direction of causality. Subsequently, variance decomposition approach and impulse response function are used to distinguish leader from the followers.FindingsThe unit root test shows that the order of integration is one, I(1). The cointegration analysis confirms the long-run relationship between underlying variables. The authors find inverse and significant impact of crime and exchange rate on tourism in the long run. On contrary, domestic prices play a positive and significant role to determine tourism in short and long run. Also, terrorism is found to be insignificant with negative impact. Further, the bidirectional causality between crime and tourism is observed in the long run. Similarly, unidirectional causality from terrorism to exchange and exchange rate to domestic price is observed in the short run.Originality/valueThe contemporary studies on crime-tourism nexus offer limited evidence, as they frequently suffer from omitted variable bias and ignore possible endogeneity issues. This study uses vector autoregressive models to overcome these biases. Similarly, the authors accommodate the role of structural break years through their analysis. Hence, the results offer more credible evidence. Moreover, the authors contribute to the existing tourism demand literature by adding crime as a potential determinate in case of Pakistan.

Does multilateral environmental diplomacy improve environmental quality? The case of the United States.

International environmental agreements have multiplied over the last five decades. We examine the impact of multilateral environmental diplomacy on carbon dioxide (CO2) emissions in the presence of capital formation, renewable energy consumption, and economic growth using the framework of the Environment Kuznets Curve (EKC) and data from the United States from 1980 to 2015. We developed a comprehensive empirical analysis using Zivot-Andrews structural break unit root tests. Co-integration analysis indicates long-run relationships of the variables. The results of the generalized linear models (GLMs) and robust least secure (ROBUSTLS) approach reveal that environmental diplomacy, capital formation, and economic growth deteriorate environmental quality in the long run, while renewable energy consumption improves it. These results support the EKC hypothesis for the United States and suggest that, in the early stages, increased environmental diplomacy stimulates CO2 emissions to a point, after which CO2 emissions start declining with further increases in international commitments and strong diplomatic relationships among countries. Policy implications for the United States are presented.

Unemployment Hysteresis in Asian Countries: Findings Based on Flexible Fourier Form and Structural Break Unit Root Tests

Unemployment Hysteresis in Asian Countries: Findings Based on Flexible Fourier Form and Structural Break Unit Root Tests

Oil price and the economic activity in GCC countries: evidence from quantile regression

Research background: The effects of oil price fluctuations on the macroeconomic performance in oil-importing and oil-exporting countries have stimulated considerable research activity. However, the debate is far from being closed.
 Purpose of the article: This paper revisits the impact of crude oil price on economic activity in the Gulf Cooperation Council oil-exporting countries. The study covers a relatively long period spanning from 1960 to 2018.
 Methods: The empirical investigation accounts for structural breaks, nonlinearity, and non-normal ?distribution of data. The Kapetanios (2005) structural breaks unit root test?? and ?Saikkonen?Lütkepohl (2000a, b, c) cointegration test with structural shifts are implemented to examine the stationary properties of data and the presence of cointegration between variables, respectively. Moreover, the quantile regression is employed to assess whether the impact of oil price on real GDP differs across different states of the economy.
 Findings & Value added: Empirical results suggest the absence of long-run cointegrating relationships between oil price and GDP in all countries. The quantile regression reveals that oil price does not affect real GDP in the same way across countries and for different business cycle phases. More specifically, the symmetric quantile regression findings reveal that oil price exerts a positive impact on GDP in all countries and that the effect is higher during the recession than expansion states. The asymmetric quantile regression shows that GDP reacts to positive oil price changes in all countries. However, only the Emirati and Omani GDPs are affected by negative oil price changes.

The Impacts of Tourism Revenues on Economic Growth: Unit Root and Cointegration Tests with Structural Break for Turkey

Turizm sektörü yirminci yüzyılın ikinci yarısından itibaren dünya ekonomisinin en hızlı gelişen ve genişleyen sektörlerinden biri haline gelmiştir. Turizm, döviz kazandırıcı etkisinin yanı sıra milli gelire, istihdama ve ödemeler dengesine olan önemli katkılarıyla ülke ekonomileri açısından alternatif bir büyüme kaynağıdır. Sektör çok yönlü özelliği ile sadece ekonomiyi değil aynı zamanda sosyal ve kültürel hayatı da etkilemektedir. Özellikle Türkiye'nin de içinde bulunduğu gelişmekte olan ülkeler açısından turizm, bir kalkınma faktörü olarak son derece önemli bir yere sahiptir. Bu çalışmanın amacı, Türkiye’nin 1987-2018 dönemi verilerini kullanarak uluslararası turizm gelirleri ile ekonomik performans arasındaki ilişkiyi incelemektir. Bu amaçla yapısal kırılmalı birim kök ve eşbütünleşme testleri kullanılmıştır. Eşbütünleşme testi sonuçlarına göre seriler arasında eşbütünleşme ilişkisi görülmektedir. Uzun vadeli tahmin sonuçlarına göre, turizm gelirlerinin ekonomik performans üzerinde pozitif bir etkisi vardır. Hata düzeltme modelinin sonuçlarına göre turizm değişkeni ile diğer tüm değişkenler arasında anlamlı bir ilişki tespit edilmiştir. Dolayısıyla kısa ve uzun dönem tahmin sonuçlarına göre turizm gelirleri ekonomik büyüme üzerinde önemli bir etkiye sahiptir.

Drastic Effects of Asian Financial Crisis on Macroeconomic Structural Changes in Lao PDR

More than a decade that the world economy has suffered with the destructive incidents from Asian Financial Crisis (AFC) occurred in 1997 and global financial crisis in 2008. Therein, the inception of AFC was derived from Thailand, and Lao PDR also treated as one of the most affected countries from AFC. This article attempts to discover innovative empirical evidence by identifying the drastic effects of AFC on macroeconomic structural changes in Lao PDR. By utilizing a special technique and superior method. Say, Zivot & Andrews structural break unit root testing developed by (Zivot & Andrews, 1992) to endogenously determine a one-time structural break, and the quarterly time series data also adopted in the period of 1990Q1-2006Q4. The empirical evidence substantiated the disastrous incident of AFC had initially affected on exchange rate (1997Q2), followed by consumer price index (1997Q2) and broad money (1997Q2) in the second quarter respectively, whilst total reserves was affected by AFC at the beginning of 1998 (1998Q1) and transmitted its shock to other macroeconomic variables in long run. Similarly, the outcomes strongly averred that AFC has engendered to drastic effects on macroeconomic structural changes in Lao PDR specifically the domestic currency has intensely depreciated (US/KIP) in the history of Lao PDR up to the present. Moreover, policy recommendations were proposed in this paper. Keywords: Zivot & Andrews Structural Break, Asian Financial Crisis, Macroeconomics Variables, Lao PDR. DOI: 10.7176/RJFA/11-22-05 Publication date: November 30 th 2020