Convergence and Cointegration

  1. Garcia-Hiernaux, Alfredo
  2. Guerrero, David E.
Revista:
Documentos de Trabajo (ICAE)

ISSN: 2341-2356

Año de publicación: 2011

Número: 22

Páginas: 1-27

Tipo: Documento de Trabajo

DIALNET GOOGLE SCHOLAR lock_openDocta Complutense editor

Otras publicaciones en: Documentos de Trabajo (ICAE)

Resumen

This paper provides a new, united, and flexible framework to measure and characterize convergence in prices. We formally define this notion and propose a model to represent a wide range of transition paths that converge to a common steady-state. Our framework enables the econometric measurement of such transi-tional behaviors and the development of testing procedures. Speci¯cally, we derive a statistical test to determine whether convergence exists and, if so, which type: as catching-up or steady-state. The application of this methodology to historic wheat prices results in a novel explanation of the convergence processes experienced during the 19th century.

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