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Structural Breaks and Convergence in Output Growth in the EU

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  • Clifford L.F. Attfield

Abstract

Convergence is defined for a multivariate time-series model of output with breaks in intercepts and in time trends. Using OECD quarterly data on output from 1980, the convergence hypothesis is tested across seven European economies, Belgium, Finland, France, Italy, the Netherlands, Spain and the UK. On the strictest definition, the hypothesis of convergence of output can be rejected but, with a weaker definition, there is some evidence of convergence for the five countries Belgium, Finland, France, the Netherlands and the UK. The data is consistent with a model in which each country's trend output is related to a common European stochastic trend. This trend output is estimated and graphed for each country.

Suggested Citation

  • Clifford L.F. Attfield, 2003. "Structural Breaks and Convergence in Output Growth in the EU," Bristol Economics Discussion Papers 03/544, School of Economics, University of Bristol, UK.
    • Handle: RePEc:bri:uobdis:03/544
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    References listed on IDEAS

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    1. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, Decembrie.
    2. Li, Qing & Papell, David, 1999. "Convergence of international output Time series evidence for 16 OECD countries," International Review of Economics & Finance, Elsevier, vol. 8(3), pages 267-280, September.
    3. Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
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    Cited by:

    1. Lima, Luiz Renato & Notini, Hilton Hostalácio & Reis Gomes, Fábio Augusto, 2010. "Empirical Evidence on Convergence Across Brazilian States," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 64(2), June.
    2. Hui, Cho-Hoi & Fong, Tom Pak-Wing, 2015. "Price cointegration between sovereign CDS and currency option markets in the financial crises of 2007–2013," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 174-190.
    3. Diego Romero‐Ávila, 2009. "The Convergence Hypothesis For Oecd Countries Reconsidered: Panel Data Evidence With Multiple Breaks, 1870–2003," Manchester School, University of Manchester, vol. 77(4), pages 552-574, July.

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    More about this item

    Keywords

    Convergence; Output Growth; Permanent Stochastic Trends;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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