Nonlinear Alternatives to Unit Root Tests and Public Finances Sustainability: Some Evidence from Latin American and Caribbean Countries

19 Pages Posted: 16 Sep 2008

See all articles by Georgios E. Chortareas

Georgios E. Chortareas

University of Athens - Faculty of Economics; University of Essex - Department of Accounting, Finance & Management; King's College London

George Kapetanios

King's College, London

Merih Uctum

City University of New York (CUNY) - Brooklyn College & the Graduate Center - Department of Economics; City University of New York (CUNY) - Graduate Center

Date Written: 0000

Abstract

We analyse the sustainability of government debt for Latin American and Caribbean countries employing unit-root tests with nonlinear alternative hypotheses and examine the robustness of our results against those from unit-root tests with breaks and threshold nonlinearities. We show that, in general support for sustainability substantially improves when nonlinear mean reversion is taken into account. We also find that the results obtained from applying various tests with nonlinear alternatives, although broadly consistent, are not identical. This suggests that reliance on a single unit-root test for assessing fiscal policy sustainability may be misleading.

Suggested Citation

Chortareas, Georgios and Kapetanios, George and Uctum, Merih, Nonlinear Alternatives to Unit Root Tests and Public Finances Sustainability: Some Evidence from Latin American and Caribbean Countries (0000). Oxford Bulletin of Economics and Statistics, Vol. 70, Issue 5, pp. 645-663, October 2008. Available at SSRN: https://ssrn.com/abstract=1269062 or http://dx.doi.org/10.1111/j.1468-0084.2008.00511.x

Georgios Chortareas (Contact Author)

University of Athens - Faculty of Economics ( email )

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University of Essex - Department of Accounting, Finance & Management ( email )

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King's College London ( email )

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George Kapetanios

King's College, London ( email )

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Merih Uctum

City University of New York (CUNY) - Brooklyn College & the Graduate Center - Department of Economics ( email )

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United States
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City University of New York (CUNY) - Graduate Center ( email )

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