The relationship between real gross domestic product, construction and home ownership sectors within the framework of the Annan Plan in the Turkish Republic of Northern Cyprus

In this paper, the relationship between real GDP, construction and home ownership sectors was investigated and estimated in Turkish Republic of Northern Cyprus for the period 1977-2018 by considering structural changes which may be occurs due to the Annan Plan in the time series data in the long-run. To this end, by using Lee and Strazicich (2003) unit root test with yearly data, the non-stanionarity features of the series in the presence of multiple structural changes which may have occured in the time series data as structural breaks were examined. Then the proceeding of the unit root tests with structural breaks especially indicating the Annan Plan, first Pesaran et al. (2001) applied autoregressive distributed lag (ARDL) model method to allow structural breaks in the long term relationship and as a result, cointegration relationship was found. Second, Johansen et al. (2000) cointegration method which allows the structural breaks in the long-run relationship was applied and it is found that there was one cointegrating vector in the system. Third, the linear regression relationship between real GDP, construction and home ownership sectors was estimated by using Bai and Perron (1998, 2003a) approach including the structural breaks in the regression relationship endogenously. Pesaran et al. (2000), no results were obtained from the approach. For both other approaches, the Annan Plan was estimated as structural break significantly in the relationship real GDP, construction and home ownership sectors with the positive effects of construction and home ownership sectors on the real GDP in Turkish Republic of Northern Cyprus.