On the use of panel stationarity tests in convergence analysis: empirical evidence for the EU countries

Authors

  • Mariusz Próchniak Warsaw School of Economics
  • Bartosz Witkowski Warsaw School of Economics

DOI:

https://doi.org/10.12775/EQUIL.2016.004

Keywords:

economic growth, convergence, catching up, stationarity, ADF test

Abstract

The study examines the concept of stochastic convergence in the EU28 countries over the 1994?2013 period. The convergence of individual countries? GDP per capita towards the EU28 average per capita income level and the pair-wise convergence between the GDP of individual countries are both analyzed. Additionally, we introduce our own concept of conditional stochastic convergence which is based on adjusted GDP per capita series in order to account for the impact of other growth factors on GDP. The analysis is based on time series techniques. To assess stationarity, ADF tests are used. The study shows that the process of stochastic convergence in the EU countries is not as widespread as the cross-sectional studies on b or s convergence indicate. Even if we extend the analysis to examine conditional stochastic convergence, the number of converging economies or pairs of countries rises, but not as much as it could be expected from the cross-sectional studies.

Downloads

Download data is not yet available.

References

Abreu, M., de Groot H. & Florax, R. (2005). A Meta-Analysis of ?-Convergence: The Legendary 2%. Journal of Economic Surveys, 19(3). http://dx.doi.org/10.1111/j.0950-0804.2005.00253.x.
Barro, R.J., & Sala-i-Martin, X. (1990). Economic Growth and Convergence Across the United States. National Bureau of Economic Research Working Paper, 3419.
Barro, R.J., & Sala-i-Martin, X. (2003). Economic Growth. Cambridge ? London: The MIT Press.
Bernard, A. B., & Durlauf, S. N. (1995). Convergence in International Output. Journal of Applied Econometrics, 10(2). http://dx.doi.org/10.1002/ jae.3950100202.
Bernard, A. B., & Durlauf, S. N. (1996). Interpreting Tests of the Convergence Hypothesis. Journal of Econometrics, 71(1-2). http://dx.doi.org/10.1016/0304-4076(94)01699-2.
Blundell, R., & Bond, S. (1998). Initial Conditions and Moment Restrictions in Dynamic Panel Data Models. Journal of Econometrics, 87(1). http://dx.doi.org/10.1016/S0304-4076(98)00009-8.
Christopoulos, D. K., & León-Ledesma, M. A. (2008). Time-series Output Convergence Tests and Stationary Covariates. Economics Letters, 101(3). http://dx.doi.org/10.1016/j.econlet.2008.09.009.
Cunado, J. (2011). Structural Breaks and Real Convergence in OPEC Countries. Journal of Applied Economics, 14(1). http://dx.doi.org/10.1016/S1514-0326(11)60007-X.
Cu?ado, J., & Pérez de Gracia, F. (2006). Real Convergence in Africa in the Second-half of the 20th Century. Journal of Economics and Business, 58(2). http://dx.doi.org/10.1016/j.jeconbus.2005.07.002.
Evans, P., & Kim, J. U. (2011). Stochastic Convergence of the Catch-up Rate and Multiple Structural Breaks in Asian Countries. Economics Letters, 111(3). http://dx.doi.org/10.1016/j.econlet.2011.02.012.
Kane, R. (2001). Investigating Convergence of the U.S. Regions: A Time-Series Analysis. U.S. Department of Commerce, Bureau of Economic Analysis Working Paper, 2001-02.
Lau, C. K. M. (2010). New Evidence about Regional Income Divergence in China. China Economic Review, 21(2). http://dx.doi.org/10.1016/j.chieco.2010.01.003.
Le Pen, Y. (2011). A Pair-wise Approach to Output Convergence between European Regions. Economic Modelling, 28(3). http://dx.doi.org/10.1016/j.eco nmod.2010.11.006.
Mankiw, N.G., Romer D. & Weil, D.N. (1992). A Contribution to the Empirics of Economic Growth. Quarterly Journal of Economics, 107(2). http://dx.doi.org/10.2307/2118477.
Matkowski, Z., Próchniak M. & Rapacki, R. (2013). Nowe i stare kraje Unii Europejskiej: konwergencja czy dywergencja? Prace i Materiały Instytutu Rozwoju Gospodarczego SGH, 91.
Pesaran, M. H. (2007). A Pair-wise Approach to Testing for Output and Growth Convergence. Journal of Econometrics, 138(1). http://dx.doi.org/10.1016 /j.jeconom.2006.05.024.
Próchniak, M., & Witkowski, B. (2013). Time Stability of the Beta Convergence among EU Countries: Bayesian Model Averaging Perspective. Economic Modelling, 30. http://dx.doi.org/10.1016/j.econmod.2012.08.031.
Próchniak, M., & Witkowski, B. (2014). On the Stability of the Catching-Up Process Among Old and New EU Member States. Implications from Bayesian Model Averaging. Eastern European Economics, 52(2). http://dx.doi.org/10.2753/EEE0012-8775520201.

Downloads

Published

31-03-2016

Issue

Section

Determinants of growth in European Union countries

How to Cite

Próchniak, M., & Witkowski, B. (2016). On the use of panel stationarity tests in convergence analysis: empirical evidence for the EU countries. Equilibrium. Quarterly Journal of Economics and Economic Policy, 11(1), 77-96. https://doi.org/10.12775/EQUIL.2016.004

Similar Articles

1-10 of 331

You may also start an advanced similarity search for this article.