A review of Phillips-Sul approach-based club convergence tests

Abstract

The Phillips-Sul approach to testing the club convergence hypothesis has attracted considerable research interest in recent years due to its advantages over alternative methods. This paper aims to review theoretical papers that extend the Phillips-Sul approach, empirical studies that apply Phillips-Sul approach-based club convergence tests, as well as the software used to execute these methods. The review revealed that, first, the Phillips-Sul approach has seen modifications regarding the procedure of trend extraction from time series, the log t regression and the algorithm clustering panel units into convergence clubs. Second, the Phillips-Sul approach has been widely used not only in economics and finance but also in ecological, energy and health studies. Finally, the paper provides guidance for further development of the Phillips-Sul approach. This review is useful for researchers and practitioners investigating convergence and club convergence processes.