JOAN LARSEN
Department of Economics, University of Manitoba
This paper presents a macroeconomic time series analysis of structural change in Greenland. Specifically, it tests for the presence of permanent level breaks and one-time pulse changes in the real exports and real GDP macroeconomic time series for the period since 1955.
An analysis of the presence of structural change reveals information about the sensitivity to shocks and disturbances of Greenland’s very small, highly dependent, and very narrowly based economy, just as it provides information to help identify some of the key sources of economic instability of that country.
The paper presents a formal econometric test and analysis of structural change in the Greenland economy. The study formulates hypotheses about the presence of structural change surrounding key events in the history of Greenland, including supply and demand shocks, and the introduction of Home Rule.
The results show evidence of a one-time break point caused by a positive supply shock in the pre-Home Rule era; a structural change caused by a negative supply shock in the post Home Rule era; and no break point or level shift with the introduction of Home Rule in Greenland.
This analysis points to the sensitivity of the Greenland economy to shocks to its natural resource supply. Additionally, the results highlight the lack of a real change in economic structure with the implementation of Home Rule. This suggests that the heavy reliance on imported Danish advisors and personnel has allowed the Danish influence to continue, which may have contributed to a lack of change in economic structure with Home Rule. It also points to the stabilizing effect of the block grant arrangement and the absence of a break in the size of service delivery.