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Income convergence in latin america in a smooth transition autoregressive framework: evidence from brazil, mexico, chile and costa rica

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  • Ahmet Ozyigit

    (Near East University)

Abstract

This study investigates the income convergence hypothesis between Mexico, Brazil, Chile and Costa Rica using a unit root test developed by Kapetanios, Shin and Snell (2003) (KSS) which tests the joint null hypothesis of linearity and a unit root against a nonlinear stationary process. In a Smooth Transition Autoregressive (STAR) framework, this study shows that the income gaps of Brazil, Chile and Costa Rica with respect to Mexico are nonlinear but stationary with significant trend effect, implying the Latin countries have not achieved a long-run steady state with respect to income convergence, but rather, are catching up with Mexico.

Suggested Citation

  • Ahmet Ozyigit, 2009. "Income convergence in latin america in a smooth transition autoregressive framework: evidence from brazil, mexico, chile and costa rica," Economics Bulletin, AccessEcon, vol. 29(4), pages 1-30.
    • Handle: RePEc:ebl:ecbull:eb-09-00789
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    File URL: http://www.accessecon.com/pubs/EB/2009/Volume29/EB-09-V29-I4-A30.pdf
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    More about this item

    Keywords

    Income convergence; non-linear income gap; non-linear stationary test; KSS test; Long-run steady state convergence; catching-up; Latin American income gap;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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