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A note on fractional stochastic convergence

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  • Marcelo Mello

    ()
    (Virginia Tech, and Faculdades IBMEC\RJ, Brazil)

  • Roberto Guimaraes-Filho

    ()
    (International Monetary Fund)

Abstract

We show that a class of non-stationary stochastic processes exhibiting long-range dependence satisfies one definition of time series convergence proposed in the literature. We also show explicitly the relationship between two time series concepts convergence proposed in the literature. Furthermore, we assess income per capita convergence for a sample OECD of economies using time series based tests. When we allow income shocks to exhibit long-range dependence, generalizing previous specifications, we find ample evidence of pairwise convergence among OECD economies. This finding is contrary to the literature that uses unit roots and cointegration tests.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 3 (2007)
Issue (Month): 16 ()
Pages: 1-14

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Handle: RePEc:ebl:ecbull:eb-07c20005

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  1. Karlsson, Sune & Lothgren, Mickael, 2000. "On the power and interpretation of panel unit root tests," Economics Letters, Elsevier, Elsevier, vol. 66(3), pages 249-255, March.
  2. Bernard, Andrew B. & Durlauf, Steven N., 1996. "Interpreting tests of the convergence hypothesis," Journal of Econometrics, Elsevier, Elsevier, vol. 71(1-2), pages 161-173.
  3. Andrew B. Bernard & Steven N. Durlauf, 1991. "Convergence of International Output Movements," NBER Working Papers 3717, National Bureau of Economic Research, Inc.
  4. Francis X. Diebold & Glenn D. Rudebusch, 1990. "On the power of Dickey-Fuller tests against fractional alternatives," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 119, Board of Governors of the Federal Reserve System (U.S.).
  5. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, American Economic Association, vol. 76(5), pages 1072-85, December.
  6. Michelacci, C. & Zaffaroni, P., 2000. "(Fractional) Beta Convergence," Papers, Banca Italia - Servizio di Studi 383, Banca Italia - Servizio di Studi.
  7. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
  8. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics, Boston College Department of Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
  9. Bernard, A.B. & Durlauf, S.N., 1993. "Convergence in International Output," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 93-7, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. De Long, J Bradford, 1988. "Productivity Growth, Convergence, and Welfare: Comment," American Economic Review, American Economic Association, American Economic Association, vol. 78(5), pages 1138-54, December.
  11. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, Elsevier, vol. 73(1), pages 5-59, July.
  12. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, Econometric Society, vol. 64(4), pages 813-36, July.
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Cited by:
  1. Mishra, Tapas & Jumah, Adusei & Parhi, Mamata, 2008. "Age-structured Human Capital and Spatial Total Factor Productivity Dynamics," Economics Series, Institute for Advanced Studies 226, Institute for Advanced Studies.
  2. Parhi, Mamata & Mishra, Tapas, 2009. "Spatial growth volatility and age-structured human capital dynamics in Europe," Economics Letters, Elsevier, Elsevier, vol. 102(3), pages 181-184, March.

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