IDEAS home Printed from https://ideas.repec.org/p/ris/kngedp/2016_001.html
   My bibliography  Save this paper

Growth Convergence and Convergence Clubs in SAARC

Author

Listed:
  • Daly, Vince

    () (Kingston University London)

  • Khan, Ghulam Yahya

    (The University of Azad Jammu and Kashmir)

Abstract

We test for output convergence during 1960 – 2014 amongst the leading member countries of the South Asian Association for Regional Cooperation (SAARC): Bangladesh, India, Nepal, Pakistan and Sri Lanka. The context is SAARC’s commitment to eventual monetary union. We test for stationarity of relative per capita output by applying established unit root tests. The results do not support the convergence hypothesis, even when structural breaks are permitted. We then use two more recently developed approaches, both of which introduce some flexibility in the depiction of convergence. The method developed by Enders and Lee (2011) allows for a smoothly evolving trend rather than a (possibly breaking) linear trend. The technique introduced by Phillips and Sul (2007, 2009) allows for the possibility of convergent sub-groups. Even with these more flexible test procedures, there is minimal evidence of growth convergence within the full SAARC membership. We find some empirical grounds for arguing that the countries considered can be allocated to two non-overlapping convergence clubs, with India and Sri Lanka enjoying a more favourable growth path than do the other member countries. This finding raises questions regarding the current feasibility of monetary union for SAARC.

Suggested Citation

  • Daly, Vince & Khan, Ghulam Yahya, 2016. "Growth Convergence and Convergence Clubs in SAARC," Economics Discussion Papers 2016-1, School of Economics, Kingston University London.
  • Handle: RePEc:ris:kngedp:2016_001
    as

    Download full text from publisher

    File URL: http://eprints.kingston.ac.uk/33889/1/2016_001.pdf
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    as
    1. Peter C. B. Phillips & Donggyu Sul, 2007. "Transition Modeling and Econometric Convergence Tests," Econometrica, Econometric Society, vol. 75(6), pages 1771-1855, November.
    2. Sakiru Adebola Solarin & Elsadig Musa Ahmed & Jauhari Dahalan, 2014. "Income convergence dynamics in ASEAN and SAARC blocs," New Zealand Economic Papers, Taylor & Francis Journals, vol. 48(3), pages 285-300, December.
    3. Kaddour Hadri, 2000. "Testing for stationarity in heterogeneous panel data," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 148-161.
    4. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    5. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    6. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
    7. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    8. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
    9. Evans, Paul & Kim, Ji Uk, 2011. "Stochastic convergence of the catch-up rate and multiple structural breaks in Asian countries," Economics Letters, Elsevier, vol. 111(3), pages 260-263, June.
    10. Kankesu Jayanthakumaran & Shao-Wei Lee, 2013. "Evidence on the Convergence of Per Capita Income: A Comparison of Founder Members of the A ssociation of S outh E ast A sian N ations and the S outh A sian A ssociation of R egional C ooperation," Pacific Economic Review, Wiley Blackwell, vol. 18(1), pages 108-121, February.
    11. Josep Lluís Carrion-i-Silvestre & Tomás del Barrio-Castro & Enrique López-Bazo, 2005. "Breaking the panels: An application to the GDP per capita," Econometrics Journal, Royal Economic Society, vol. 8(2), pages 159-175, July.
    12. Schmidt, Peter & Phillips, C B Peter, 1992. "LM Tests for a Unit Root in the Presence of Deterministic Trends," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 257-287, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ghulam Yahya Khan & Salik Mehboob & Lydia Bares Lopez, 2018. "Deindustrialization and Economic Growth: Empirical Evidence from Pakistan," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 6(4), pages 462-475, December.

    More about this item

    Keywords

    SAARC; growth convergence; convergence clubs;

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:kngedp:2016_001. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Andrea Ingianni). General contact details of provider: http://edirc.repec.org/data/sekinuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.