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Persistence in Convergence

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  • Thanasis Stengos

    ()
    (University of Guelph)

  • M. Ege Yazgan

    ()
    (Istanbul Bilgi University)

Abstract

In this paper, we examine the convergence hypothesis using a long memory framework that allows for structural breaks and the non reliance on a benchmark country. We find that even though the long memory framework of analysis is much richer than the simple I(1)=I(0) alternative, a simple absolute divergence and rapid convergence dichotomy produced by the latter is sufficient to capture the behavior of the gaps in per capita GDP levels and growth rates results respectively. This is in contrast to the findings of Dufrénot, Mignon and Naccache (2009) who found strong evidence of long memory for output gaps. The speed of convergence captured by the estimated long memory parameter d, is explained by differences in physical and human capital as well as fiscal discipline characteristics of economic policies pursued by different countries.

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Bibliographic Info

Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 34_11.

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Date of creation: Jul 2011
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Handle: RePEc:rim:rimwps:34_11

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Keywords: growth convergence; long memory;

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Cited by:
  1. Thanasis Stengos & M. Ege Yazgan, 2012. "Persistence in Real Exchange Rate Convergence," Working Paper Series 16_12, The Rimini Centre for Economic Analysis.
  2. M. Ege Yazgan & Hakan Yilmazkuday, 2014. "High versus Low Inflation: Implications for Price-Level Convergence," Koç University-TUSIAD Economic Research Forum Working Papers 1412, Koc University-TUSIAD Economic Research Forum.

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