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(Czech Republic, Hungary, Slovakia, and Slovenia) that only experience one or two breaks. The estimated breaks are associated with political or institutional events of relevance in the transition process. Some of these events are common to all the countries, whereas others are idiosyncratic. For example, the degree of openness is larger for the small economies, so they are more exposed to external shocks and therefore exhibit more breaks. In the case of Poland, the higher number of breaks is due to the special transition strategy followed from the very beginning of the 1990s. In any event, structural breaks in the NAIRU of transition countries can be with a high degree of confidence associated with institutional changes coming from the implementation of market-oriented reforms. Further, the combination of techniques introduced in sections 3.4–3.6 has been exploited by Uctum, Thurston, and Uctum (2006) who assess fiscal performances in G7 and selected Latin American and Asian countries. In the paper questions related to fiscal performance and sustainability are considered. The authors find that traditional ADF tests of sustainability overwhelmingly fail to reject the non-stationarity of public debt in the troubled areas of the world. However, these tests suffer a major weakness as they are sensitive to structural breaks, which bias results towards not rejecting unit roots. For this reason the authors control for structural breaks by using Bai and Perron (1998, 2003a) methodology; it is found that the outcomes change drastically for a majority of countries. In sum, they find that: (i) The traditional unit root tests often overlook the corrective actions taken by many governments. Controlling for structural breaks changes the non-stationarity results dramatically among the countries. (ii) The estimation of a reaction function for governments, expanded by incorporating structural breaks, provides further evidence for significant active anti-debt policies among G7 countries, and to a lesser extent in the other regions. Finally, testing for multiple structural changes has recently taken also multivariate approach. Relevant techniques are covered for example by Perron and Qu (2007), and Kejriwal and Perron (2010). A detailed coverage of these technique is beyond the scope of this text, though.
3.7 NON-LINEAR STRUCTURE AND CONDITIONAL HETEROSKEDASTICITY In the preceding sections we presented various univariate time series models and tests. Although often quite diverse in their nature, all the presented models have one common feature. We have always assumed the variance of the error term conditional on the information revealed before the time t realizations (at the time t – 1), denoted as vart −1 [ε t ] = Et −1 [ε t2 ] , to be constant and equal to the Ukázka elektronické knihy, UID: KOS213979