Are Eastern European Countries Catching Up? Time Series Evidence for Czech Republic, Hungary, and Poland

The catching up process in Czech Republic, Hungary, and Poland is analyzed by investigating the integration properties of log-differences in per-capita GDP versus the EU15 and a Mediterranean country group. The authors account for structural changes by using unit root tests that allow for two endogenous breaks in the level and the trend. Findings indicate that Czech Republic and Hungary are stochastically converging towards the Mediterranean group, while only Czech Republic is stochastically converging towards EU15.