Real Convergence in Selected OECD Countries

The purpose of this study is to re-examine the convergence hypothesis both linear and nonlinear time series techniques for 21 OECD countries during the period of 1950-2008. The linear augmented Dickey Fuller (ADF) test results support the existence of a unit root which means that there is nonconvergence in both de-meaned output and the output gap series constructed as the difference between actual GDP series of each OECD country from that of the USA. We used a nonlinear test as an alternative procedure if there are nonlinearities in the series. The nonlinear testing procedures reject the null hypothesis that there is a unit root in the series providing some supportive evidence of a nonlinear output convergence among the selected OECD economies.