Robust Tests for Convergence Clubs
Luisa Corrado, Melvyn Weeks, Thanasis Stengos, M. Ege Yazgan
TL;DR
This paper introduces a bootstrap-based method for testing convergence clubs that performs well with large cross-sectional data and few time periods, overcoming limitations of traditional asymptotic tests.
Contribution
It proposes a novel recursive bootstrap approach for convergence testing that does not require prior knowledge of club composition and improves accuracy over existing methods.
Findings
Bootstrap test accurately identifies convergence clubs.
Reduces size distortion compared to standard tests.
Effective in cross-country and regional EU data.
Abstract
In many applications common in testing for convergence the number of cross-sectional units is large and the number of time periods are few. In these situations asymptotic tests based on an omnibus null hypothesis are characterised by a number of problems. In this paper we propose a multiple pairwise comparisons method based on an a recursive bootstrap to test for convergence with no prior information on the composition of convergence clubs. Monte Carlo simulations suggest that our bootstrap-based test performs well to correctly identify convergence clubs when compared with other similar tests that rely on asymptotic arguments. Across a potentially large number of regions, using both cross-country and regional data for the European Union, we find that the size distortion which afflicts standard tests and results in a bias towards finding less convergence, is ameliorated when we utilise…
Peer Reviews
No public reviews on file for this paper yet. If you reviewed it on a platform where reviews are public (OpenReview, ICLR, NeurIPS, ICML), you can paste yours below so the community can read it here.
Videos
No videos yet. Explain this paper in a talk, walkthrough, or lecture? Add one.
Robust Tests for Convergence Clubs††thanks: We are grateful to Andrew Harvey, Hashem Pesaran, Jonathan Temple, Mike
Wickens, Gernot Dopplehoffer, Vasco Carvalho for their comments on the work.
Luisa Corrado
University of Rome Tor Vergata and University of Cambridge Luisa Corrado gratefully acknowledges the Marie-Curie Intra European fellowship 039326. [email protected]
Thanasis Stengos
University of Guelph
Melvyn Weeks
Faculty of Economics and Clare College, University of Cambridge
M. Ege Yazgan
Istanbul Bilgi University