Income convergence: the Dickey-Fuller test under the simultaneous presence of stochastic and deterministic trends
Manuel Gómez-Zaldívar and
Daniel Ventosa-Santaulària ()
MPRA Paper from University Library of Munich, Germany
We investigate the efficiency of the Dickey-Fuller (DF) test as a tool to examine the convergence hypothesis. In doing so, we first describe two possible outcomes, overlooked in previous studies, namely Loose Catching-up and Loose Lagging-behind. Results suggest that this test is useful when the intention is to discriminate between a unit root process and a trend stationary process, though unreliable when used to differentiate between a unit root process and a process with both deterministic and stochastic trends. This issue may explain the lack of support for the convergence hypothesis in the aforementioned literature.
Keywords: Divergence; Loose Catching-up/Lagging-behind; Convergence; De- terministic and Stochastic Trends. (search for similar items in EconPapers)
JEL-codes: C32 O40 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Published in Annales d'Economie et de Statisque 99/100 (2010): pp. 429-445
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/58778/1/MPRA_paper_58778.pdf original version (application/pdf)
Working Paper: Income Convergence: The Dickey-Fuller Test under the Simultaneous Presence of Stochastic and Deterministic Trends (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:58778
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().