TAR Panel Unit Root Tests and Real Convergence

We propose a new panel data methodology to test real convergence in a non-linear framework. It extends the existing methods by combining three approaches: the threshold model, the panel data unit root tests and the computation of critical values by bootstrap simulation. We apply our methodology on the per-capita outputs of a total of …fteen European countries, including some of the East-European countries that have recently joined the EU. Keywords: real convergence, panel data unit root tests, bootstrap, threshold model, non-linearity. JEL Classi…cation: C12, C33, F43. The authors thank Fundacion BBVA for …nancial support, as well as the Spanish Ministry of Science and Technology for project SEC2001/0855. yCorresponding Author: Universidad de Murcia, Facultad de Economia y Empresa, Departamento de Metodos Cuantitativos para la Economia, 30100, Murcia, Spain. E-mail: mcamacho@um.es.