Growth, Cycles and Convergence in US Regional Time Series

Vasco Marques de Carvalho () and Andrew C. Harvey

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: This article reports the results of fitting unobserved components (structural) time series models to data on real income per capita in eight regions of the United States. The aim is to establish stylised facts about cycles and convergence. A new model is developed in which convergence components are combined with a common trend and cycles. These convergence components are formulated as a second-order error correction mechanism which allows temporary divergence while imposing eventual convergence. This model is able to characterise the convergence patterns of all but the two richest US regions; these appear to have been diverging from the others in recent years. The use of unit root tests for testing convergence is critically assessed in the light of these results.

Keywords: balanced growth; error correction mechanism; Kalman filter; signal extraction; unobserved components (search for similar items in EconPapers)
JEL-codes: C32 O40 (search for similar items in EconPapers)
Date: 2002-08
Note: EM
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Related works:
Journal Article: Growth, cycles and convergence in US regional time series (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:cam:camdae:0221

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