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Per Capita Output Convergence : The Dickey-Fuller Test Under the Simultaneous Presence of Stochastic and Deterministic Trends

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  • Manuel Gomez-Zaldivar
  • Daniel Ventosa-Santaularia

Abstract

We reconsider previous studies that analyze the convergence hypothesis in a time series framework. In doing so, we first describe two possible outcomes overlooked in this literature, namely loose catching-up and loose lagging-behind, these cases are in-between divergence and catching-up; then, we provide evidence of the proficiency of the Dickey-Fuller (DF) test to identify the new out-comes by means of asymptotic theory as well as Monte Carlo experiments. Finally, in the empirical section we illustrate that the excessive evidence in favor of divergence may be due to lack of attention to the cases loose catching-up and loose lagging-behind.

Suggested Citation

  • Manuel Gomez-Zaldivar & Daniel Ventosa-Santaularia, 2010. "Per Capita Output Convergence : The Dickey-Fuller Test Under the Simultaneous Presence of Stochastic and Deterministic Trends," Annals of Economics and Statistics, GENES, issue 99-100, pages 429-445.
  • Handle: RePEc:adr:anecst:y:2010:i:99-100:p:429-445
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    File URL: http://www.jstor.org/stable/41219173
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    Cited by:

    1. Ventosa-Santaulària Daniel & Gómez-Zaldívar Manuel, 2011. "Testing for a Deterministic Trend When There is Evidence of Unit Root," Journal of Time Series Econometrics, De Gruyter, vol. 2(2), pages 1-26, January.
    2. Mirjana Gligoric, 2014. "Paths Of Income Convergence Between Country Pairs Within Europe," Economic Annals, Faculty of Economics, University of Belgrade, vol. 59(201), pages 123-156, April – J.

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