International Output Convergence, Breaks, and Asymmetric Adjustment
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Dimitris K Christopoulos
We present time series evidence on output convergence for 14 countries relative to the U.S. for the 1900-2008 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 the 1920s crisis and WWII. These breaks are associated to different patterns of post-WWII growth performance. Asymmetric mean reversion also appears to be an important feature driving convergence for most countries in the sample. This emphasizes the importance that disruptive historical events have on the dynamics of relative outputs.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Artikel in diesem Heft
- Article
- Semi-Parametric Forecasting of Realized Volatility
- Debt Sustainability in Selected Euro Area Countries: Empirical Evidence Estimating Time-Varying Parameters
- Purchasing Power Parity Analyzed from a Continuous-Time Model
- International Output Convergence, Breaks, and Asymmetric Adjustment
- Extracting the Cyclical Component in Hours Worked
- Volatility Feedback and Risk Premium in GARCH Models with Generalized Hyperbolic Distributions
Artikel in diesem Heft
- Article
- Semi-Parametric Forecasting of Realized Volatility
- Debt Sustainability in Selected Euro Area Countries: Empirical Evidence Estimating Time-Varying Parameters
- Purchasing Power Parity Analyzed from a Continuous-Time Model
- International Output Convergence, Breaks, and Asymmetric Adjustment
- Extracting the Cyclical Component in Hours Worked
- Volatility Feedback and Risk Premium in GARCH Models with Generalized Hyperbolic Distributions
