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Fiscal sustainability in BRICS countries: evidence from asymmetric unit root test augmented with Fourier function

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  • Phiri, Andrew

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.

Suggested Citation

  • Phiri, Andrew, 2019. "Fiscal sustainability in BRICS countries: evidence from asymmetric unit root test augmented with Fourier function," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 15(2).
    • Handle: RePEc:ags:pdcbeh:301146
    DOI: 10.22004/ag.econ.301146
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    File URL: https://ageconsearch.umn.edu/record/301146/files/201907241016_15_BEH_2019_Vol15_Issue2_Andrew-Phiri_How_Fiscal_sustainability_in_BRICS_countries_254-260.pdf
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    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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