Convergence Dynamics between South Africa and Her Main Trading Partners

Abstract

The convergence of per capita gdp growth rates of less developed countries towards those of more industrialized economies is a central debate amongst growth economists. This study contributes to the literature by examining whether South Africa, as arguably Africa’s most developed economy, converges towards the growth of her main trading partners (i.e. Belgium, Botswana, China, Germany, India, Japan, Mozambique, Namibia, Netherlands, South Korea, United Arab Emirates (uae), United Kingdom (UK), United States (US), Zambia and Zimbabwe). To this end, we examine the integration properties of per capita GDP differences between South Africa and each of her trading partners and we particularly employ unit root testing procedures which are robust to ESTAR-type nonlinearities and unobserved smooth structural breaks. Our empirical evidence points to convergence between South Africa and Belgium, Botswana, China, Germany, India, Japan, Mozambique, Namibia, Netherlands, South Korea, the UAE, the UK and the US but not with Zambia and Zimbabwe.

Keywords

• convergence
• flexible fourier form (fff) unit root tests
• unobserved structural breaks
• asymmetries
• south africa