GROWTH SLOWDOWNS AND MIDDLE-INCOME TRAP: EVIDENCE FROM NEW UNIT ROOT FRAMEWORK
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...
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| Main Authors: | , , , , |
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| Format: | Article |
| Published: |
World Scientific
2024
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| Subjects: | |
| Online Access: | http://eprints.um.edu.my/45502/ https://doi.org/10.1142/S0217590820500083 |
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| Summary: | 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. |
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