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Growth Slowdowns and Middle-Income Trap: Evidence from New Unit Root Framework

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  • Furuoka, Fumitaka
  • Pui, Kiew Ling
  • Ezeoke, Chinyere Mary Rose
  • Jacob, Ray Ikechukwu
  • Yaya, OlaOluwa S

Abstract

This paper suggests a new testing procedure to systematically examine the middle-income trap (MIT). To empirically demonstrate this procedure, one high income and 14 middle-income countries are examined using newly developed unit root tests - Fourier ADF with structural break (FADF-SB) and Seemingly Unrelated Regressions Fourier ADF (SUR-FADF). The FADF-SB test incorporates unknown nonlinearity and smooth break in the time-series, while the SUR-FADF test accounts for cross-sectional dependency. The empirical findings produced mixed results: 10 countries have a relatively high possibility of facing the MIT problem, while only one country has a relatively low possibility of facing the problem. For the remaining three countries, it is uncertain whether they will face the problem of MIT. These empirical findings have significant policy implications.

Suggested Citation

  • Furuoka, Fumitaka & Pui, Kiew Ling & Ezeoke, Chinyere Mary Rose & Jacob, Ray Ikechukwu & Yaya, OlaOluwa S, 2019. "Growth Slowdowns and Middle-Income Trap: Evidence from New Unit Root Framework," MPRA Paper 98672, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:98672
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    More about this item

    Keywords

    Cross-sectional dependency; Fourier approximation; Income convergence; Middle-income trap; Structural break; Unit root JEL Classification: C19; C22; N17 1. Introduction;
    All these keywords.

    JEL classification:

    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania

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