Assessing economic convergence in the EU: is there a perspective for the ‘cohesion countries’?

This article analyses the stochastic income convergence within the EU-15. The empirical analysis uses per capita GDP, in PPP and in constant prices of 2005 for the period 1950 to 2010. Apart from the traditional DF type tests we also account for possible structural changes. In this direction, we employ the Zivot-Andrews (1992) and the Lee-Strazicich (1999, 2003) testing procedures, for one and two breaks, endogenously determined. Furthermore, we apply the Carlino and Mills (1993) methodology proposed for the detection of β-convergence. The overall evidence supports the existence of two discrete clubs, the first by the ‘cohesion countries’ (Portugal, Ireland, Greece and Spain) and the second by the remaining members. In particular, there is a clear evidence of convergence within each club, whereas between clubs there is a luck of catching-up effects. Furthermore, investigation of correlation between relative per capita GDP of each country and several factors that are often identified as growth stimulants, namely Total Factor Productivity, FDI, investment and openness confirm, with the exception of Greece, a strong association between these factors and the convergence process. However, progress in the convergence has not been uniform across countries and over time, reflecting the specific interactions between domestic and international factors and their impact on the convergence process of individual countries.     

Is the consumption-income ratio stationary in African countries? Evidence from new time series tests that allow for structural breaks

This article examines whether the consumption-income ratio is stationary in 50 African countries. We use the residual augmented least squares (RALS-LM) unit root test that allows for structural breaks. The empirical evidence shows that the consumption income ratio is stationary around structural breaks in most (44 out of 50) African countries. This is consistent with the predictions of most economic theories. The general finding of mean reversion implies that (policy) shocks are likely to have only temporary effects on the consumption-income ratio in most African countries .     

Is the efficient market hypothesis day-of-the-week dependent? Evidence from the banking sector

In this article, we propose a new hypothesis: that the efficient market hypothesis is day-of-the-week-dependent. We apply the test to firms belonging to the banking sector and listed on the NYSE. We find significant evidence that the efficient market hypothesis is day-of-the-week-dependent. Overall, for only 62% of firms, the unit root null hypothesis is rejected on all the five trading days. We also discover that when investors do not account for unit root properties in devising trading strategies, they obtain spurious profits.     

中国股票指数的结构断点根检验研究

包括股票价格指数在内的许多金融和经济时间序列的动态特征,常常可以用随机游走或均值回返假说来描述,使用Zivot、Andrew(1992)和Lumsdaine、Papell(1997)提出的内生结构断点根检验方法,以上海证券交易所A股指数为例,考察股票指数的动态特征,结果表明A股指数符合随机游走假说.     

Modelling mortality: are we heading in the right direction?

Predicting life expectancy has become of upmost importance in society. Pension providers, insurance companies, government bodies and individuals in the developed world have a vested interest in understanding how long people will live for. This desire to better understand life expectancy has resulted in an explosion of stochastic mortality models many of which identify linear trends in mortality rates by time. In making use of such models for forecasting purposes, we rely on the assumption that the direction of the linear trend (determined from the data used for fitting purposes) will not change in the future, recent literature has started to question this assumption. In this article, we carry out a comprehensive investigation of these types of models using male and female data from 30 countries and using the theory of structural breaks to identify changes in the extracted trends by time. We find that structural breaks are present in a substantial number of cases, that they are more prevalent in male data than in female data, that the introduction of additional period factors into the model reduces their presence, and that allowing for changes in the trend improves the fit and forecast substantially.     

Unit roots,postwar slowdowns and long-run growth: Evidence from two structural breaks

This paper provides evidence on the unit root hypothesis and long-term growth by allowing for two structural breaks. We reject the unit root hypothesis for three-quarters of the countries – approximately 50% more rejections than in models that allow for only one break. While about half of the countries exhibit slowdowns following their postwar breaks, the others have grown along paths that have become steeper over the past 120 years. The majority of the countries, including most of the slowdown countries, exhibit faster growth after their second breaks than during the decades preceding their first breaks. First version received: May 2001/Final version received: January 2002     

Does the law of one price hold in a high-inflation environment? A tale of two cities in Turkey

This study addresses the price convergence in two cities in Turkey (Istanbul and Ankara) using annual data over the three-quarters of the twentieth century (1922–1998), characterized by prevailing high inflation rates for most of the period. In contrast to the rest of the literature addressing convergence in price levels with a typical result of extremely slow convergence rates at best, we argue that convergence is much easier detected in growth rates rather than levels of prices. We suggest using the bounds testing procedure of Pesaran et al. (2001) for this purpose. We find a clear-cut evidence on the existence of a common driving force behind inflation dynamics in Istanbul and Ankara – a finding that is in contrast with the results typically reported in related literature.     

On the joint Fourier–ESTAR testing of PPP

The purchasing power parity (PPP) is the hypothesis that the real exchange rate series are stationary. This study briefly reviews and applies six competing unit root test procedures to test PPP. Reflecting the existing literature, the results are mixed. The Kiliç test is the most favourable while the Kapetanios, Shin, and Snell (KSS) test is the least favourable to PPP and the standard ADF test lies in between. The same conclusion applies to the Fourier extensions of those three tests. The results support a recently suggested F-test for the significance of Fourier terms in unit root test equations.     

Asymmetric Behaviour of Spanish Regional House Prices

In connection with the housing market, which is presently raising a great deal of concern among the general public, this paper investigates regional housing prices in Spain using variable co-integration techniques. It analyzes the asymmetric behavior in real house prices among the Spanish regions focusing on the study of the long-term relationships over time. This paper raises an important question of the national averages masking important regional asymmetries. Results indicate evidence of co-integration, which suggests a broad grouping of regions based on physical proximity or similar economic characteristics.

外生冲击与房地产真实价格波动--对1998～2003年中国31省(市、区)的实证研究

文章首先根据经济学模型界定了两个重要指标:自相关系数与收敛系数.认为不同的外生冲击对这两个系数有不同的影响,而它们决定了房地产真实价格波动形态的差异.在此基础上,文章利用1998～2003年中国31个省(市、区)的面板数据对中国房地产市场进行了实证研究,其结论是,在真实人均可支配收入和真实建筑成本较高、真实税后住宅抵押贷款利率较低的地区有较大的自相关系数和较小的收敛系数,从而房地产真实价格具有更大的波动性.为使房地产真实价格在均衡价格附近平稳运行,降低开发成本和提高消费者购买成本能收到较好的效果.     

Is income converging in China?

This study adopts a flexible Fourier unit‐root test proposed by Enders and Lee (2012) to revisit the tendency towards convergence in real per capita income among provinces after economic reform in China. When a data‐generating process is non‐linear, a Fourier series not only allows for the possibility of an unknown number of structural breaks with unknown forms but also allows for the use of a low‐frequency component to capture multiple changes. Contrary to what the linear statistics suggest, our results from a flexible unit‐root test indicate that China's eastern and western regions are converging to their own specific steady states.     

Nonlinearities between oil spot and futures markets： Evidence from intraday data

This paper builds on the literature of the relationship between oil spot and futures prices from the NYNEX market, both in their means and in their conditional volatilities, to investigate whether the association is linear or not. The novelty of this work is based on intraday data from both markets. The empirical findings indicate the presence of nonlinearities both in means and conditional volatilities. Moreover, non-linear causality estimations both in means and in volatilities reveal the presence of bi-directional causality, a fact that provides additional support to the hypothesis that both markets are driven by the same information sets.     

The intertemporal relation between government revenue and expenditure in the United Kingdom, 1750 to 2004

We examine the intertemporal relation between government revenue and expenditure in the UK during 1750 to 2004. We pay particular attention to long run trends by applying a battery of unit root and cointegration techniques to the data, and we use a modified Granger causality test on data spans organized around structural breaks in the series. The results suggest that, allowing for structural breaks, UK real revenue and spending are I(1) series and cointegrated and that Granger causality runs from government spending to revenue. As such, the ‘spend-tax’ hypothesis appears to best characterize the long run intertemporal relation between government revenue and spending in the UK.     

Do the Spanish regions converge? A unit root analysis for the HDI of the Spanish regions

This article studies the possible stochastic convergence between the Spanish regions in 1980–2010. The application of unit root techniques to the new Human Development Index recently calculated in Herrero et al. (2013) allows us to show that the evolution of the Spanish economy can be better understood as the sum of divergent forces rather than as a group of convergent regions. Similar conclusions can be drawn when the per capita GDP is used, although these two variables exhibit different patterns of behaviour at the end of the sample. Finally, we also observe that the distance between northern and southern regions has increased since 2000.     

The Polish exchange rate system: A unit root and cointegration analysis

In October 1991 Poland has established a crawling peg regime in which the zloty is tied to a currency basket and devalued with a monthly rate of crawl. If the monetary authorities are successful in defending the crawling peg the basket rate measured in Polish zloty is supposed to be stationary. Furthermore, a stable long-run relationship between the zloty-U.S. dollar rate and the basket's value expressed in U.S. dollar is expected to exist. The results of the unit root and cointegration analysis indicate that the monetary authorities have been able to defend the crawling peg for the sample periods under study, although it seems that not all requirements of the exchange rate regime have been met. The foreign exchange markets, however, have not supported the relationships derived from the crawling peg system after the introduction of the free floating system in April 2000.The final version of this paper has been prepared while I was a Jean Monnet Fellow at the European University Institute. I would like to thank the EUI for the award of the Fellowship and its hospitality. Moreover, I am grateful to Helmut Lütkepohl, Anja Schulz, Ralf Brüggemann, and two anonymous referees for many helpful comments and suggestions. I also thank the Deutsche Forschungsgemeinschaft, SFB 373, for financial support.