Nonlinearities in economic convergence. The German-Spanish case.
Authors:
Lorenzo Escot, Ruth Mateos, Elena Olmedo, Jose Ramon Sanchez Galan, Ricardo Gimeno
One of the main targets for the European Union is to level the different economic
conditions and opportunities for the companies all over the countries of the Union. It is
essential to know if real convergence of economies is being reached, and if nonlinearities
are present in this union process in order to try to explain better the behavior or that
process and the presence of similar patterns among the different countries.
On the other hand, a way to look for real convergence lies on studying the evolution of
the stock market indexes and the interest rates series of the long-term bond that the
different countries of the European Union may have. Germany has been chosen as a reference
country for the Spanish convergence.
The analysis stars removing linear relationships in the time series. After that,
different kind of nonlinearity measures are calculated, like the correlation dimension,
Lyapunov exponents, BDS test and similar.
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