Convergence and the Cypriot Economies:Time Series Theory and Evidence, 1977-2000
This paper empirically investigates the convergence hypothesis in terms of GDP per capita (or worker) and total factor productivity for both Northern and Southern Cyprus economies over the period 1977-2000. We test whether both economies during this period converge to a common steady state growth path in the neoclassical modelling framework by conducting unit root tests. We also estimate the productivity level and the ‘economic distance’ between the two economies based on the concept of ‘total factor productivity’ (TFP) and the ‘half-life’ formula respectively. The evidence indicates that there is no tendency for the two economies to converge on a common steady state growth path. The evidence also suggests that the Northern economy is less productive than the Southern one and under current conditions would cover half the ‘economic distance’ to the Southern economy in an average of 30 years.
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Volume (Year): 6 (2003)
Issue (Month): 1 (Summer)
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