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JSPES, Vol. 46, No. 3-4 (Fall-Winter 2021)
pp. 315-329

The Impact of Increased Interaction and Trade Between the Turkish and Greek Cypriot Economies

Ahmet Ozyigit
University of Mediterranean Karpasia
Northern Cyprus

Fehiman Eminer
European University of Lefke,
Northern Cyprus

The economy of Turkish Cypriot Northern Cyprus is showing
signs of income convergence with that of Greek Cypriot Cyprus. Using a unit root testing approach in the presence of nonlinear income gap data, the aim of this study is to identify how opening the borders between the two regions in 2003 has affected the two disparate economies with respect to per capita income convergence, either in the form of catch-up growth or in the longrun steady state. Both the linear unit root testing process and the non-linear framework show that the Turkish Cypriot per capita income is catching up with the Greek Cypriot per capita income However, a small trend term indicates that the convergence is rather slow, and there is no evidence of a long-run steady state convergence.