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A “SURE” Approach to Testing for Convergence in Regional Integrated areas: An Application to Output Convergence in Mercosur

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Author Info

  • Camarero, Mariam

    ()
    (Jaume I University)

  • G. Flôres, Renato

    (Fundaçao Getulio Vargas)

Abstract

In this paper we propose the use of a sequential multivariate approach to test for convergence. These tests allow us to reconcile the time series literature with the cross-sectional dimension which is basic when testing for convergence in regional blocs. In addition, this methodology helps to avoid the problem due to the limited dataset length. We apply multivariate unit root tests in two stages. First, we test for non-convergence without identifying the countries within the group that effectively converge and, in a second stage, the countries that converge are identified. The SURE technique allows for the existence of correlations across the series without imposing a common speed of mean reversion. The empirical results for Mercosur countries show that there is evidence of catching up of the small countries towards Brazil and, to some extent, Argentina. In contrast, the evidence of catching-up among the larger countries is weaker.

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Bibliographic Info

Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

Volume (Year): 23 (2008)
Issue (Month): ()
Pages: 1-23

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Handle: RePEc:ris:integr:0422

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Web page: http://econo.sejong.ac.kr/
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Related research

Keywords: Convergence; Trade liberalization; Multivariate tests; Unit roots; Mercosur; Per capita income; SURE;

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Cited by:
  1. Brida, Juan Gabriel & London, Silvia & Rojas, Mara, 2012. "Convergencia interregional en dinámica de regimenes: el caso del Mercosur
    [Regional convergence of dynamic of regimens: the case of Mercosur]
    ," MPRA Paper 36863, University Library of Munich, Germany.
  2. Brida, Juan Gabriel & London, Silvia & Rojas, Mara, 2013. "Una aplicación de los árboles de expansión mínima y árboles jerárquicos al estudio de la convergencia interregional en dinámica de regímenes || An Application of Minimum Spanning Trees and Hierarchica," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 15(1), pages 3-28, June.

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