International Output Convergence, Breaks, and Asymmetric Adjustment
AbstractWe present time series evidence on output convergence for 14 countries relative to the US for the 1900-2000 period. We develop tests that allow for an unknown number of breaks in the series and also asymmetric convergence speed. We show that this asymmetry arises theoretically when the economy is not in the neighbourhood of the steady state. Breaks are modelled through a Fourier function fitted to the deterministic part of a time series and asymmetries are modelled as a smooth transition function that matches the theory predictions. The tests are shown to have good finite sample properties. The results support the existence of convergence towards a mean that displays a break around WWII. These breaks, in the majority of cases, appear to be permanent. Asymmetric mean reversion also appears to be an important feature driving convergence for most countries in the sample. These results emphasize the importance that disruptive historical events have on the dynamics of relative outputs.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 14566.
Date of creation: Feb 2009
Date of revision:
Other versions of this item:
- Christopoulos Dimitris K & Leon-Ledesma Miguel A., 2011. "International Output Convergence, Breaks, and Asymmetric Adjustment," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 15(3), pages 1-33, May.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-25 (All new papers)
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