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Growth, Cycles and Convergence in US Regional Time Series

  • Vasco M.Carvalho
  • Andrew C.Harvey

This article reports the results of fitting unobserved components (structural) time series models to data on real income per capita in eight regions of the United States. The aim is to establish stylised facts about cycles and convergence. A new model is developed in which convergence components are combined with a common trend and cycles. These convergence components are formulated as a second-order error correction mechanism which allows temporary divergence while imposing eventual convergence. This model is able to characterise the convergence patterns of all but the two richest US regions; these appear to have been diverging from the others in recent years. The use of unit root tests for testing convergence is critically assessed in the light of these results.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/wp0221.pdf
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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0221.

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Length: 45
Date of creation: Aug 2002
Date of revision:
Handle: RePEc:cam:camdae:0221
Note: EM
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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  1. Carlino, Gerald A. & Mills, Leonard O., 1993. "Are U.S. regional incomes converging? : A time series analysis," Journal of Monetary Economics, Elsevier, vol. 32(2), pages 335-346, November.
  2. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 393-95, October.
  3. Bernard, Andrew B. & Durlauf, Steven N., 1996. "Interpreting tests of the convergence hypothesis," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 161-173.
  4. Steven N. Durlauf & Danny T. Quah, 1998. "The New Empirics of Economic Growth," NBER Working Papers 6422, National Bureau of Economic Research, Inc.
  5. Bernard, A.B. & Durlauf, S.N., 1993. "Convergence in International Output," Working papers 93-7, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Gerald Carlino & Keith Sill, 2000. "Regional income fluctuations: common trends and common cycles," Working Papers 00-8, Federal Reserve Bank of Philadelphia.
  7. Vasco M.Carvalho & Andrew C.Harvey, 2002. "Growth, Cycles and Convergence in US Regional Time Series," Cambridge Working Papers in Economics 0221, Faculty of Economics, University of Cambridge.
  8. Timothy J. Vogelsang & Marc Tomljanovich, 2002. "Are U.S. regions converging? Using new econometric methods to examine old issues," Empirical Economics, Springer, vol. 27(1), pages 49-62.
  9. Vahid, F & Engle, Robert F, 1993. "Common Trends and Common Cycles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 341-60, Oct.-Dec..
  10. Quah, Danny, 1993. "Galton's Fallacy and Tests of the Convergence Hypothesis," CEPR Discussion Papers 820, C.E.P.R. Discussion Papers.
  11. Xavier Sala-i-Martin, 1994. "Regional cohesion: Evidence and theories of regional growth and convergence," Economics Working Papers 104, Department of Economics and Business, Universitat Pompeu Fabra.
  12. Nyblom, Jukka & Harvey, Andrew, 2000. "Tests Of Common Stochastic Trends," Econometric Theory, Cambridge University Press, vol. 16(02), pages 176-199, April.
  13. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  14. repec:fgv:epgrbe:v:47:n:2:a:1 is not listed on IDEAS
  15. Harvey, A. & Bates, D., 2003. "Multivariate Unit Root Tests and Testing for Convergence," Cambridge Working Papers in Economics 0301, Faculty of Economics, University of Cambridge.
  16. Bart Hobijn & Philip Hans Franses, 2000. "Asymptotically perfect and relative convergence of productivity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(1), pages 59-81.
  17. Loewy, Michael B. & Papell, David H., 1996. "Are U.S. regional incomes converging? Some further evidence," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 587-598, December.
  18. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 369-80, October.
  19. Evans, Paul & Karras, Georgios, 1996. "Convergence revisited," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 249-265, April.
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