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Convergence in the trends and cycles of Euro‐zone income

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  • Vasco M. Carvalho
  • Andrew C. Harvey

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.

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  • Vasco M. Carvalho & Andrew C. Harvey, 2005. "Convergence in the trends and cycles of Euro‐zone income," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 275-289.
    • Handle: RePEc:wly:japmet:v:20:y:2005:i:2:p:275-289
    DOI: 10.1002/jae.820
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    5. Alka Obadić & Vladimir Arčabić & Lucija Rogić Dumančić, 2021. "Labor market institutions convergence in the European Union," EFZG Working Papers Series 2102, Faculty of Economics and Business, University of Zagreb.
    6. Diegel, Max, 2022. "Time-varying credibility, anchoring and the Fed's inflation target," Discussion Papers 2022/9, Free University Berlin, School of Business & Economics.
    7. Kozlova, Olesia & de Jesus Noguera, Jose, 2018. "Achievers or slackers? Per capita income trends in European countries," Journal of Policy Modeling, Elsevier, vol. 40(6), pages 1332-1345.
    8. Paul Johnson & Chris Papageorgiou, 2020. "What Remains of Cross-Country Convergence?," Journal of Economic Literature, American Economic Association, vol. 58(1), pages 129-175, March.
    9. Lucian-Liviu Albu, 2016. "Trends in the relation between regional convergence and economic growth in EU," ERSA conference papers ersa16p244, European Regional Science Association.
    10. Carsten Trenkler & Enzo Weber, 2020. "Identifying shocks to business cycles with asynchronous propagation," Empirical Economics, Springer, vol. 58(4), pages 1815-1836, April.
    11. Mihaela Simionescu, 2015. "About regional convergence clubs in the European Union," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 33(1), pages 67-80.
    12. Hwa-Taek Lee & Gawon Yoon, 2013. "Does purchasing power parity hold sometimes? Regime switching in real exchange rates," Applied Economics, Taylor & Francis Journals, vol. 45(16), pages 2279-2294, June.
    13. ALBU, Lucian – Liviu, 2017. "Budgetary Spending And Growth In The Eu," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 4(1), pages 11-17.
    14. Obadić, Alka & Arčabić, Vladimir & Rogić Dumančić, Lucija, 2023. "Club convergence of labor market institutions in the European Union," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 876-896.
    15. Steven Clark & T. Coggin, 2009. "Trends, Cycles and Convergence in U.S. Regional House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 39(3), pages 264-283, October.
    16. Shushanik Papanyan, 2015. "Digitization and Productivity: Measuring Cycles of Technological Progress," Working Papers 15/33, BBVA Bank, Economic Research Department.
    17. Sandra Eickmeier, 2009. "Comovements and heterogeneity in the euro area analyzed in a non-stationary dynamic factor model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(6), pages 933-959.
    18. Massimiliano Affinito & Fabio Farabullini, 2009. "Does the Law of One Price Hold in Euro-Area Retail Banking? An Empirical Analysis of Interest Rate Differentials across the Monetary Union," International Journal of Central Banking, International Journal of Central Banking, vol. 5(1), pages 5-37, March.
    19. Robert-Paul Berben & W. Jos Jansen, 2005. "Bond Market and Stock Market Integration in Europe," DNB Working Papers 060, Netherlands Central Bank, Research Department.
    20. Ismail H. GENC & Anil RUPASINGHA, 2009. "Time-series Tests of Stochastic Earnings Convergence across US Nonmetropolitan Counties, 1969-2004," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 9(2).
    21. Peter Dreuw, 2023. "Structural time series models and synthetic controls—assessing the impact of the euro adoption," Empirical Economics, Springer, vol. 64(2), pages 681-725, February.
    22. Linda Glawe & Helmut Wagner, 2021. "Divergence Tendencies in the European Integration Process: A Danger for the Sustainability of the E(M)U?," JRFM, MDPI, vol. 14(3), pages 1-22, March.
    23. Ismail Genc & Jon Miller & Anil Rupasingha, 2011. "Stochastic convergence tests for US regional per capita personal income; some further evidence: a research note," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 46(2), pages 369-377, April.

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