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Analysing Convergence in Europe Using a Non-linear Single Factor Model

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Author Info
Ulrich Fritsche () (Department for Economics and Politics, University of Hamburg, and DIW Berlin)
Vladimir Kuzin () (German Institute for Economic Research (DIW) Berlin)

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Abstract

We investigate convergence in European price level, unit labor cost, income, and productivity data over the period of 1960-2006 using the non-linear time-varying coefficients factor model proposed by Phillips and Sul (2007). This approach is extremely flexible on order to model a large number of transition paths to convergence. We find regional clusters in consumer price level data. GDP deflator data and unit labor cost data are far less clustered than CPI data. Income per capita data indicate the existence of three convergence clubs without strong regional linkages; Italy and Germany are not converging to any of those clubs. Total factor productivity data indicate the existence of a small club including fast-growing countries and a club consisting of all other countries.

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File URL: http://www.wiso.uni-hamburg.de/hepdoc/macppr_2_2008.pdf
File Format: application/pdf
File Function: First version, 2008
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Publisher Info
Paper provided by Hamburg University, Department Wirtschaft und Politik in its series Macroeconomics and Finance Series with number 200802.

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Length: 22 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:hep:macppr:200802

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Web page: http://www.wiso.uni-hamburg.de/dwp
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Related research
Keywords: Price level; Income; Productivity; Convergence; Factor Model; European Monetary Union;

Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Nazrul Islam, 2003. "What have We Learnt from the Convergence Debate?," Journal of Economic Surveys, Blackwell Publishing, vol. 17(3), pages 309-362, 07. [Downloadable!] (restricted)
  2. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR, CES, MSH, vol. 15(30), pages 7-46, 04. [Downloadable!] (restricted)
  3. Rose, Andrew K & Engel, Charles, 2002. "Currency Unions and International Integration," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(4), pages 1067-89, November.
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  4. Bart Hobijn & Philip Hans Franses, 2000. "Asymptotically perfect and relative convergence of productivity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(1), pages 59-81. [Downloadable!]
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  5. Philip R. Lane, 2006. "The Real Effects of EMU," The Institute for International Integration Studies Discussion Paper Series iiisdp115, IIIS. [Downloadable!]
    Other versions:
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