Phiri, Andrew
(2018):
*Robust analysis of convergence in per capita GDP in BRICS economies.*

Preview |
PDF
MPRA_paper_86936.pdf Download (8MB) | Preview |

## Abstract

Whilst the issue of whether or not per capita GDP adheres to the convergence theory continues to draw increasing attention within the academic paradigm, with very little consensus having been reached in the literature thus far. Our study contributes to the literature by examining the stationarity of per capita GDP for BRICS countries using annual data collected between 1971 and 2015. Considering that our sample covers a period underlying a number of crisis and structural breaks within and amongst the BRICS countries, we rely on a robust nonlinear unit root testing procedure which captures a series of unobserved structural breaks. Our results confirm on Brazil and China being the only two BRICS economies who present the most convincing evidence of per capita GDP converging back to it’s natural equilibrium after an economic shock, whilst Russia and South Africa provide less convincing evidence of convergence dynamics in the time series and India having the weakest convergence properties.

Item Type: | MPRA Paper |
---|---|

Original Title: | Robust analysis of convergence in per capita GDP in BRICS economies |

Language: | English |

Keywords: | Per capita GDP; Convergence; unit root tests; nonlinearities; structural breaks; BRICS Emerging economies |

Subjects: | C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C21 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence |

Item ID: | 86936 |

Depositing User: | Dr. Andrew Phiri |

Date Deposited: | 28 May 2018 19:28 |

Last Modified: | 26 Sep 2019 15:42 |

References: | Becker R., Enders W. and Hurn S. (2006), “A stationary test in the presence of an unknown number of breaks”, Journal of Time Series Analysis, 27(3), 381-409. Beechey M. and Osterholm P. (2008), “Revisiting the uncertain unit root in GDP and CPI: Testing for non-linear trend reversion”, Economics Letters, 100(2), 221-223. Ben-David D. and Papell D. (1995), “The great wars, the great crash and steady-state growth: Some new evidence about an old stylized fact”, Journal of Monetary Economics, 36, 453-475. Ben-David D. Lumsdaine R. and Papell D. (2003), “Unit roots, postwar slowdowns and long-run growth: Evidence from two structural breaks”, Empirical Economics, INCOMPLETE. Caner M. and Hansen B. (2001), “Threshold autoregressive with a unit root”, Econometrica, 69(6), 1555-1596. Chang T., Lee C. Chou P. (2012), “Is per capita real GDP stationary in five Southeastern European countries? Fourier unit root test”, Empirical Economics, 43(3), 1073-1082. Cheung Y. and Chinn M. (1996), “Deterministic, stochastic, and segmented trends in aggregate output: A cross country analysis”, Oxford Economic Papers, 48, 134-162. Christopoulos D. (2006), “Does a non-linear mean reverting process characterize real GDP movements?”, Empirical Economics, 31(3), 601-611. Cogley T. (1990), “International evidence on the size of the random walk in output”, Journal of Political Economy, 96, 501-518. Cuestas J. and Garratt D. (2011), “Is real GDP per capita a stationary process? Smooth transitions, nonlinear trends and unit root testing”, Empirical Economics, 41(3), 555-563. Cunado J. (2011), “Structural breaks and real convergence in OPEC countries”, Journal of Applied Economics, 14(1), 101-117. Dickey D. and Fuller W. (1979), “Distribution of the estimators for autoregressive time series with a unit root”, Journal of the American Statistical Association, 74(366), 427-431. Dipietro W. and Anoruo E. (2006), “GDP per capita and its challenges as measures of happiness”, International Journal of Social Economics, 33(10), 698-709 Duck N. (1992), “UK evidence on breaking trend functions”, Oxford Economic Papers, 44, 426-439. Elliot G., Rothenburg T. and Stock J. (1996), “Efficient tests for an autoregressive unit root”, Econometrica, 64(4), 813-836. Enders W. and Granger C. (1998), “Unit root test and asymmetric adjustment with an example using the term structure of interest rates”, Journal of Business and Economic Statistics, 16(3), 304-311. Enders W. and Lee J. (2012), “The flexible Fourier form and Dickey-Fuller type unit root tests”, Economic letters, 117, 196-199. Fleissig A. and Strauss J. (1999), “IS OECD per capita GDP trend or difference stationary? Evidence from panel unit root tests”, Journal of Macroeconomics, 21(4), 673-690. Gallant A. (1981), “On the basis in flexible functional forms and an essentially unbiased form: the flexible Fourier form”, Journal of Econometrics, 15, 211-245. Haan J. and Zelhorst D. (1993), “Does output have a unit root? New international evidence”, Applied Economics, 25, 953-960. Kapetanois G., Shin Y. and Snell A. (2003), “Testing for unit root in the nonlinear STAR framework”, Journal of Econometrics, 112(2), 359-379. Kejriwal M. and Lopez C. (2013), “Unit roots, level shifts, and trend breaks in per capita output: A robust evaluation”, Econometric Reviews, 32(8), 892-927. Kim D. and Perron P. (2009), “Unit root tests allowing for a break in the trend function at an unknown time under both the null and alternative hypothesis”, Journal of Econometrics, 148(1), 1-13. Kormendi R. and Meguire P. (1990), “A multicountry characterization of the non-stationarity of aggregate output”, Journal of Money, Credit and Banking, 22, 77-93. Kruse R. (2011), “A new unit root test against ESTAR based on a class of modified statistics”, Statistical Papers, 52(1), 71-85. Kwaiotkowski D., Phillips P., Schmidt P. and Shin Y. (1992), “Testing the null hypothesis of stationarity against the alternative of a unit root”, Journal of Econometrics, 54(1-3), 159-178. Lee J. and Strazicich M. (2004), “Minimum Lagrange multiplier unit root with two structural breaks”, The Review of Economics and Statistics, 85(4), 1082-1089. Lee J. and Strazicich M. (2013), “Minimum LM unit root with one structural break”, Economics Bulletin, 33(4), 2483-2493. Lima M. and Resende M. (2007), “Convergence of per capita GDP in Brazil: An empirical note”, Applied Economic Letters, 14(5), 333-335. Loewy M. and Papell D. (1996), “Are U.S. regional incomes converging? Some further evidence”, Journal of Monetary Economics, 38, 587-598. Luukkonen R., Saikkonen P. and Terasvirta T. (1988), “Testing linearity against smooth transition autoregressive models”, Biometrica, 75(3), 491-499. Lumsdaine R. and Papell D. (1997), “Multiple trend breaks and the unit-root hypothesis”, Review of Economics and Statistics, 79(2), 212-218. Murray V. and Anoruo E. (2009), “Are per capita real GDp series in African countries non-stationary or non-linear? What does empirical evidence reveal?”, Economics Bulletin, 29(4), 2492-2504. Narayan P. (2007), “Are G7 per capita real GDP levels non-stationary?”, Japan and the World Economy, 19, 374-379. Narayan P. (2008), “Is Asian per capita GDP panel stationary?”, Empirical Economics, 34, 439-449. Narayan P. and Smyth R. (2005), “Structural breaks and unit roots in Australian macroeconomics time series”, Pacific Economic Review, 10(4), 421-437. Nassif A., Feijo C. and Araujo E. (2015), “The BRICS’s long-term economic performance: A comparative analysis”, International Journal of Political Economy, 45(4), 294-314. Nelson C. and Plosser C. (1982), “Trends and random walks in macroeconomic time series: Some evidence and implications”, Journal of Monetary Economics, 10(2), 139-162. Nelson C. and Murray C. (2000), “The uncertain trend in US GDP”, Journal of Monetary Economics, 10, 139-162. Ng S. and Perron P. (1995), “Unit root tests in ARMA models with data-dependent methods for the selection of the truncation lag”, Journal of the American Statistical Association, 90(429), 268-281. Ng S. and Perron P. (2001), “Lag length selection and the construction of unit root tests and good size and power”, Econometrica, 69(6), 1519-1554. Ohara H. (1999), “A unit root test with multiple trend breaks: a theory in and an application to the US and Japanese macroeconomic time series”, Japanese Economic Review, 50, 266-290. Oehler-Sincai I. (2015), “Standpoints regading the BRICS construction”, Procedia Economics and Finance, 22, 502-511. Oskooe S. and Akbari L. (2015), “Is per capita real GDP stationary? Evidence from OPEC countries”, International Journal of Humanities and Social Sciences, 5(6), 166-168. Ozturk I. and Kalyoncu H. (2007), “Is per capita real GDP stationary in the OECD countries?”, Ekonomski Pregled, 58, 680-688. Pascalau R. (2010), “Unit root tests with smooth breaks: An application to the Nelson-Polsser data set”, Applied Economic Letters, 17(6), 565-570. Perron P. (1989), “The Great crash, the oil price shock, and the unit root hypothesis”, Econometrica, 57(6), 1361-1401. Phillips P. and Perron P. (1988), “Testing for a unit root in time series regression”, Biometrika, 75(2), 335-346. Rapach D. (2002), “Are real GDP levels nonstationary? Evidence from panel data tests”, Southern Economic Journal, 68(3), 473-795. Rodrigues P. and Taylor R. (2012), “The flexible Fourier form and local generalized least squares de-trending unit root tests”, Oxford Bulletin of Economics and Statistics, 74(5), 736- 759. Shelley and Wallace (2011), “Further evidence regarding nonlinear trend reversion of rel GDP and the CPI”, Economics Letters, 112(1), 56-59. Shen P., Su C. and Chang H. (2013), “Are real GDL levels nonstaionary across Central and Eastern European countries?”, Baltic Journal of Economics, 13(1), 99-108. Solarin S. and Anoruo E. (2015), “Nonlinearity and the unit root hypothesis for African per capita real GDP”, International Economic Journal, 29(4), 617-630. Smyth R. and Inder B. (2004), “IS Chinese provincial real GDP per capita nonstationary? Evidence from multiple trend break unit root tests”, China Economic Review, 15(1), 1-24. Su C. and Chang H. (2011), “Is per capita real GDP stationrary in Central and Eastern European countries?”, Eastern European Economics, 49(3), 54-65. Su J. and Nguyen J. (2013), “Alternative unit root testing strategies using the Fourier approximation”, Economic Letters, 121, 8-11. Tiwari A., Chaudhari A. and Suresh M. (2012), “Are Asian per capita GDP stationary? Evidence from first and second generation panel unit root tests”, Transition Studies Review, 19- 3-11. Tiwari A. and Suresh M. (2014), “Mean reversion in per capita GDP of Asian countries: Evidence from a nonlinear panel unit root test”, Journal of Economic Studies, 41(1), 2-11. Ucar N. and Omay T. (2009), “Testing for unit root in nonlinear heterogeneous panels”, Economics Letters, 104 (1), 5-8. Vougas D. (2007), “Is the trend in post-WW II US real GDP uncertain or non-linear?”, Economic Letters, 56, 348-355. Ying Z., Dong C., Chang H. and Su C. (2014), “Are real GDL levels stationary in African countries”, South African Journal of Economics, 82(3), 392-401. Zivot E. and Andrews D. (1992), “Further evidence on the great crash, the oil-price shocks and the unit root hypothesis”, Journal of Business and Economic Statistics, 10(3), 251-270. |

URI: | https://mpra.ub.uni-muenchen.de/id/eprint/86936 |