Pairwise output convergence in selected countries of East Asia and the Pacific : an application of Stochastic Unit Root test

Khorshed Chowdhury, Girijasankar Mallik

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    Abstract

    This paper examines time series cross-country output convergence in eleven counties of East Asia and the Pacific. Specifically, we model the cross-country output differences as a Stochastic Unit Root (STUR) processes. Using the output-differences between Japan (reference country) and the other ten sampled countries, we find output convergence only for the Japan–Australia, Japan–New Zealand, Japan–Taiwan and Japan–Thailand country-pairs. Alternatively, using the output-differences between Australia (reference country) and the other ten sampled countries, we fail to find any evidence of convergence in seven country pairs of the sampled countries except for Australia–Japan, Australia–Hong Kong and Australia–New Zealand country pairs. Overall, our results do not support output convergence in a broader perspective but support the notion of “club convergence” among a small subset (30–40 per cent) of similar fast-growing economies. The causes for non-convergence of per capita real GDP for a majority of country pairs are an empirical issue that involves country-specific factors that render output gaps highly persistent, but we can broadly outline a few reasons for non-convergence and these include, low and unequal economic growth, lack of economic and financial integration among the sampled countries.
    Original languageEnglish
    Pages (from-to)1-15
    Number of pages15
    JournalASEAN Economic Bulletin
    Volume28
    Issue number1
    DOIs
    Publication statusPublished - 2011

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