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Fiscal sustainability in BRICS countries: Evidence from asymmetric unit root tests augmented with Fourier fucntion

Phiri, Andrew (2018): Fiscal sustainability in BRICS countries: Evidence from asymmetric unit root tests augmented with Fourier fucntion.

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Abstract

The study’s main focus is to demonstrate the importance of accounting for nonlinearities and unobserved structural breaks in testing for stationary in fiscal budgets. This is achieved by applying the KSS unit root tests augment with a flexible Fourier form to the fiscal budgets of BRICS counties. We find that when unit root tests do not account for structural breaks, the fiscal budgets tend to contain a unit root whereas when structural breaks are considered without accounting for nonlinearities the series ae stationary. Simultaneously accounting for asymmetries and unobserved structural breaks more effectively segregates the data into stationary and nonstationary series.

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