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Cycle and Income-Level Convergence in the EU Countries: An Identification of Turning Points Based on the Hidden Markov Models

Author

Listed:
  • Michał Bernardelli

    (SGH Warsaw School of Economics)

  • Mariusz Próchniak

    (SGH Warsaw School of Economics)

  • Bartosz Witkowski

    (SGH Warsaw School of Economics)

Abstract

This paper aims to identify turning points in the economic growth paths of the European Union countries on the basis of the Hidden Markov Models. These turning points are then introduced as structural breaks in the ?-convergence model. Such an approach combines the analysis of cyclical and income-level convergence. Quarterly GDP time series for the whole EU28 group has two turning points (in 2008 and 2013). The hypothesis about the ?-convergence was successfully verified, but the ?-convergence process had a different pace between the turning points, being the slowest (or not even existing) one in the 2008–2012 subperiod, i.e. during the global crisis.

Suggested Citation

  • Michał Bernardelli & Mariusz Próchniak & Bartosz Witkowski, 2017. "Cycle and Income-Level Convergence in the EU Countries: An Identification of Turning Points Based on the Hidden Markov Models," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 47, pages 27-42.
    • Handle: RePEc:sgh:annals:i:47:y:2017:p:27-42
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    References listed on IDEAS

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    3. Matkowski, Zbigniew & Prochniak, Mariusz & Rapacki, Ryszard, 2016. "Income Convergence in Poland vis-à-vis the EU: Major Trends and Prospects," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 37-55.
    4. Walter Nonneman & Patrick Vanhoudt, 1996. "A Further Augmentation of the Solow Model and the Empirics of Economic Growth for OECD Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(3), pages 943-953.
    5. Lars-Erik Öller & Lasse Koskinen, 2004. "A classifying procedure for signalling turning points," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(3), pages 197-214.
    6. Mihály Borsi & Norbert Metiu, 2015. "The evolution of economic convergence in the European Union," Empirical Economics, Springer, vol. 48(2), pages 657-681, March.
    7. Monfort, Mercedes & Cuestas, Juan Carlos & Ordóñez, Javier, 2013. "Real convergence in Europe: A cluster analysis," Economic Modelling, Elsevier, vol. 33(C), pages 689-694.
    8. Matkowski, Zbigniew & Prochniak, Mariusz & Rapacki, Ryszard, 2016. "Real Income Convergence between Central Eastern and Western Europe: Past, Present, and Prospects," EconStor Conference Papers 146992, ZBW - Leibniz Information Centre for Economics.
    9. Próchniak, Mariusz & Witkowski, Bartosz, 2013. "Time stability of the beta convergence among EU countries: Bayesian model averaging perspective," Economic Modelling, Elsevier, vol. 30(C), pages 322-333.
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    Citations

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    Cited by:

    1. Michał Bernardelli & Mariusz Próchniak & Bartosz Witkowski, 2018. "Przydatność ukrytych modeli Markowa do oceny podobieństwa krajów w zakresie synchronizacji wahań cyklicznych i wyrównywania się poziomów dochodu," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 53, pages 77-96.
    2. Burhan Can Karahasan, 2020. "Winners and losers of rapid growth in Turkey: Analysis of the spatial variability of convergence," Papers in Regional Science, Wiley Blackwell, vol. 99(3), pages 603-644, June.
    3. Michal Bernardelli & Mariusz Prochniak & Bartosz Witkowski, 2021. "Time stability of the impact of institutions on economic growth and real convergence of the EU countries: implications from the hidden Markov models analysis," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 16(2), pages 285-323, June.

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    More about this item

    Keywords

    catching-up; convergence; hidden Markov model; European Union; Viterbi path;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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