Convergence in the trends and cycles of Euro-zone income

Andrew Harvey and Vasco Carvalho

Journal of Applied Econometrics, 2005, vol. 20, issue 2, 275-289

Abstract: Multivariate unobserved components (structural) time series models are fitted to annual post-war observations on real income per capita in countries in the Euro-zone. The aim is to establish stylized facts about convergence as it relates both to long-run and short-run movements. A new model, in which convergence components are combined with a common trend and similar cycles, is proposed. The convergence components are formulated as a second-order error correction mechanism; this ensures that the extracted components change smoothly, thereby enabling them to be separated from transitory cycles. Copyright © 2005 John Wiley & Sons, Ltd.

Date: 2005
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Journal Article: Convergence in the trends and cycles of Euro‐zone income (2005)
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DOI: 10.1002/jae.820

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