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A “SURE” Approach to Testing for Convergence in Regional Integrated areas: An Application to Output Convergence in Mercosur

Author

Listed:
  • Camarero, Mariam

    () (Jaume I University)

  • G. Flôres, Renato

    (Fundaçao Getulio Vargas)

Abstract

In this paper we propose the use of a sequential multivariate approach to test for convergence. These tests allow us to reconcile the time series literature with the cross-sectional dimension which is basic when testing for convergence in regional blocs. In addition, this methodology helps to avoid the problem due to the limited dataset length. We apply multivariate unit root tests in two stages. First, we test for non-convergence without identifying the countries within the group that effectively converge and, in a second stage, the countries that converge are identified. The SURE technique allows for the existence of correlations across the series without imposing a common speed of mean reversion. The empirical results for Mercosur countries show that there is evidence of catching up of the small countries towards Brazil and, to some extent, Argentina. In contrast, the evidence of catching-up among the larger countries is weaker.

Suggested Citation

  • Camarero, Mariam & G. Flôres, Renato, 2008. "A “SURE” Approach to Testing for Convergence in Regional Integrated areas: An Application to Output Convergence in Mercosur," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 1-23.
  • Handle: RePEc:ris:integr:0422
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    Citations

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    Cited by:

    1. Brida, Juan Gabriel & London, Silvia & Rojas, Mara, 2013. "Una aplicación de los árboles de expansión mínima y árboles jerárquicos al estudio de la convergencia interregional en dinámica de regímenes || An Application of Minimum Spanning Trees and Hierarchica," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 15(1), pages 3-28, June.
    2. Brida, Juan Gabriel & London, Silvia & Rojas, Mara, 2012. "Convergencia interregional en dinámica de regimenes: el caso del Mercosur
      [Regional convergence of dynamic of regimens: the case of Mercosur]
      ," MPRA Paper 36863, University Library of Munich, Germany.
    3. repec:bla:reviec:v:25:y:2017:i:4:p:799-830 is not listed on IDEAS

    More about this item

    Keywords

    Convergence; Trade liberalization; Multivariate tests; Unit roots; Mercosur; Per capita income; SURE;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F15 - International Economics - - Trade - - - Economic Integration

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