Dimitris, Chrsitopoulos and Miguel, Leon-Ledesma (2009): International Output Convergence, Breaks, and Asymmetric Adjustment.
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We present time series evidence on output convergence for 14 countries relative to the US for the 1900-2000 period. We develop tests that allow for an unknown number of breaks in the series and also asymmetric convergence speed. We show that this asymmetry arises theoretically when the economy is not in the neighbourhood of the steady state. Breaks are modelled through a Fourier function fitted to the deterministic part of a time series and asymmetries are modelled as a smooth transition function that matches the theory predictions. The tests are shown to have good finite sample properties. The results support the existence of convergence towards a mean that displays a break around WWII. These breaks, in the majority of cases, appear to be permanent. Asymmetric mean reversion also appears to be an important feature driving convergence for most countries in the sample. These results emphasize the importance that disruptive historical events have on the dynamics of relative outputs.
|Item Type:||MPRA Paper|
|Original Title:||International Output Convergence, Breaks, and Asymmetric Adjustment|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General
|Depositing User:||Dimitris Christopoulos|
|Date Deposited:||11. Apr 2009 14:41|
|Last Modified:||12. Feb 2013 00:13|
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