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Output convergence in Mercosur: multivariate time series evidence

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  • Camarero, Mariam
  • Flôres Junior, Renato Galvão
  • Tamarit, Cecilio R.

Abstract

The aim of this paper is to provide evidence on output convergence among the Mercosur countries and associates, using multivariate time-series tests. The methodology is based on a combination of tests and estimation procedures, both univariate and multivariate, applied to the differences in per capita real income. We use the definitions of time-series convergence proposed by Bernard & Durlauf and apply unit root and tests proposed by Abuaf & Jorion and Taylor & Sarno. In this same multivariate context, the Flôres, Preumont & Szafarz and Breuer, MbNown & Wallace tests, which allow for the existence of correlations across the series without imposing a common speed of mean reversion, identify the countries that convergence. Concerning the empirical results, there is evidence of long-run convergence or, at least, catching up, for the smaller countries, Bolivia, Paraguay, Peru and Uruguay, towards Brazil and, to some extent, Argentina. In contrast, the evidence on convergence for the larger countries is weaker, as they have followed different (or rather opposing) macroeconomic policy strategies. Thus the future of the whole area will critically depend on the ability of Brazil, Argentina and Chile to find some scope for more cooperative policy actions.

Suggested Citation

  • Camarero, Mariam & Flôres Junior, Renato Galvão & Tamarit, Cecilio R., 2003. "Output convergence in Mercosur: multivariate time series evidence," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 510, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  • Handle: RePEc:fgv:epgewp:510
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    Cited by:

    1. Stefan Sperlich & Yvonne Sperlich, 2012. "Growth and Convergence in South–South Integration Areas: Empirical Evidence," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 12032, Institut d'Economie et Econométrie, Université de Genève.

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