We analyse the dynamics of public debt in Serbia between 2004Q3 and 2014Q3. Our results are as follows: i) traditional unit root tests do not reject the unit root hypothesis for public debt; ii) unit root tests robust to sample size and high AR (1) coefficient provide mixed evidence with respect...

The Perron test is the most commonly applied procedure to test for a unit root in the presence of a structural break of unknown timing in the trend function. Deriving the Perron-type test regression from an unobserved component model, it is shown that the test regression in fact is nonlinear in...