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 .     

Can labour market institutions explain high unemployment rates in the new EU member states?

This article studies the question whether labour market institutions can explain the large differences in unemployment rates in the new member states. It investigates several labour market institutions and concludes that they are on average no more rigid in the new member states than in the old ones. However, there is a lot of heterogeneity both in terms of institutions and unemployment rates. The impact of labour market institutions on performance is empirically examined for a panel of European countries. These results are used to assess to what extent labour market institutions are responsible for the diverse unemployment experiences in the new member states. Labour market institutions can explain only a small part of these differences. Other causes of unemployment seem to be more important.

Testing for hysteresis: Unemployment persistence and wage adjustment

This paper proposes a new testing strategy for unemployment hysteresis as the joint restriction of a unit-root in the unemployment rate and no feedback effect of unemployment in the Phillips wage equation. The associated test statistics are derived when this joint restriction is imposed and when a sequential two steps testing strategy is adopted. An empirical application leads to reject the null hypothesis of wage hysteresis for most of our OECD countries. Evidence against hysteresis is reinforced when accounting for wage adjustments in the bivariate approach. First version received: July 1999/Final version received: May 2002 RID="*" ID="*"  We thank R. Boyer, F. Collard, F. Karamé, F. Langot, F. Mihoubi, W. Pohlmeier and two anonymous referees for fruitful comments. This paper has also benefited from discussions at the T2M conference (Montréal, may 1999) and ESEM99 (Santiago, august 1999). The traditional disclaimer applies.     

INFLATION TARGETING AND THE STATIONARITY OF INFLATION: NEW RESULTS FROM AN ESTAR UNIT ROOT TEST

In this paper, we examine the time series properties of inflation in seven countries that have adopted inflation targeting. Unlike previous studies, we utilize a non‐linear mean reverting adjustment mechanism for inflation and we discover that, although deviations of inflation from the target can exhibit a region of non‐stationary behaviour, overall they are stationary indicating successful targeting implementation.     

Unemployment rate cycles in Europe

This article analyses the duration of cycles in the unemployment rate series in a group of EU countries. It extends the model by Bierens (2001) and follows Gil-Alana (2001) by allowing for fractional cyclical integration. Once cycles are introduced in the model, we have more evidence of mean reversion than in previous studies.     

A reexamination of the Nelson-Plosser data set using recursive and sequential tests

The present paper applies to the Nelson-Plosser data set the recursive, rolling, and sequential tests proposed by Banerjee, Lumsdaine and Stock (1992) for unit roots in the presence of mean or trend breaks. Unlike Perron's method, these three types of test endogenize the break point in the mean or trend and thus are more appealing in empirical studies. The (reverse) recursive test indicates rejection of the unit root null in industrial production and unemployment rate. The sequential test indicates that nominal GNP and common stock prices are stationary with a break in the mean.Helpful comments from G. S. Maddala and two anonymous referees are greatly acknowledged.     

THE REAL INTEREST RATE DIFFERENTIAL: INTERNATIONAL EVIDENCE BASED ON NON-LINEAR UNIT ROOT TESTS

This paper aims at testing international parity conditions by using non-linear unit root tests advocated by Kapetanios et al . (2003, KSS). Results from the KSS tests based on 17 countries (G7 and 10 Asian countries) overwhelmingly show that the adjustment of real interest rates towards real interest rate parity (RIP) follows a non-linear process except for the Taiwan, Hong Kong and Philippines relationships with both the USA and Japan. Overall, the empirical results are in favour of RIP using the USA and Japan as the centre countries but only if non-linearities are accounted for in the data-generating process. Our findings confirm that interest rate differentials, like the real exchange rates reported in recent literature, display a non-linear mean reversion process.     

HYSTERESIS IN UNEMPLOYMENT REVISITED: EVIDENCE FROM PANEL LM UNIT ROOT TESTS WITH HETEROGENEOUS STRUCTURAL BREAKS

This paper applies the panel LM unit root tests with heterogeneous structural breaks in level by Im  et al. ( Oxford Bulletin of Economics and Statistics , 67 (2005), pp. 393–419) to re-examine the validity of hysteresis in the unemployment rates of 19 OECD countries. Our empirical findings are favourable to the stationarity of the unemployment rates, i.e., the unemployment hysteresis hypothesis is strongly rejected. Our results suggest that shocks to unemployment rates are temporary and soon converge when we control for breaks. A major policy implication of the study is that a fiscal or monetary stabilization policy would not have permanent effects on the unemployment rates of the 19 OECD countries.     

Are business cycles stationary fluctuations around a deterministic trend? Empirical evidence from 79 developing countries

There is a large literature that tests the univariate time series properties of the real output series following the seminal work of Nelson and Plosser (1982). Whether or not real output is characterized by a unit root process has important implications. A unit root in real output, for instance, is inconsistent with the notion that business cycles are stationary fluctuations around a deterministic trend. In this paper, we investigate the univariate time series properties of real output for 79 developing countries using the conventional augmented Dickey and Fuller (1979) unit root test, the Zivot and Andrews’ (1992) one structural break unit root test, and the Lumsdaine and Papell (1997) two structural breaks unit root test. Our main finding is that, for 40 countries, real output is stationary around a trend. This indicates that business cycles are stationary fluctuations around a deterministic trend for only 51% of the developing countries in our sample.     

计量经济学方法之时间序列分析

本文介绍了一元时间序列分析中常用的AR、MA、ARMA和ARIMA等经典模型,分析了这几个经典模型的理论要点以及单位根检验的方法和程序,总结了时间序列分析在预测等方面的优势及其在复杂科学管理中的应用,并以我国一月期国债回购利率和上证180月收益率为分析对象,介绍了一元线性回归分析的基本步骤。     

Problems Existed in Applications of Cointegration Theory in China

Although the Cointegration Theory was founded by the C.W.J Granger and other economists in the 1980s, it was not widely used in China until C.W.J Granger was awarded with Nobel Prize in 2003. Since then, a lot of economic papers introducing or applying Cointegration Theory have emerged, but the phenomenon of misuse of this theory possibly arose at the same time. Based on some of these papers obtained from web site （www.cnki.net）, this paper explores the applications of Cointegration Theory in China and draws some initial conclusions. Most of these applications are reasonable, but some of them are a bit blindfold or even contradictory in conclusions, which indicates that the overall application quality has a large room to get improved and should be paid more attention by academe.     

The weak form market efficiency investigation of American,European and Asian stock markets

This paper investigates the empirical validity of the Weak Form Efficient Market Hypothesis for American, European and Asian stock markets. Random Walk Hypothesis is used to prove weak form efficiency in American, European and Asian stock indices. ADF and PP Unit Root Tests have been used to test unit root in time series of daily data of American, European and Asian stock indices. Results show that sample of stock markets are weak-form efficient in terms of the Random Walk Hypothesis.     

Persistence in Corporate Performance? Empirical Evidence from Panel Unit Root Tests

Persistence in corporate performance is analyzed in the framework of empirical tests of unit root behavior concerning firm profits. Data for firm-specific rates of return is applied in a set of panel unit root tests to address the question of persistence in profits both at firm level and for the aggregate level of industry-specific profits. The firm data all reject a null hypothesis of random walk behavior of profits but when smoothing profit rates at a two-digit NACE-code level for industries, the empirical evidence is more mixed as most industries show up with a unit root in aggregate rates of return, i.e. indicating persistence in corporate performance.     

Testing of Unit Root Cycles in the Swedish Economy

In this article we examine the existence of unit root cycles in 11 long Swedish macroeconomic time series. We use a version of the tests of Robinson (1994) that permits us to test this type of hypothesis, which is based on the Gegenbauer processes. The results show that, for most of the series, the unit root cycles occur approximately every six periods. However, in case of the GDP deflator and wage rates, first differences may be required before proceeding to the analysis of the cyclical structure.JEL code: C22