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Measure the Energy Market Integration in East Asia: A Principal Component Analysis Approach

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  • Miaojie Yu

    (Chatham House, UK)

Abstract

This paper measures the current energy market integration (EMI) in the 16 East Asia countries, comprising the ASEAN 10 countries, China, Japan, Korea, India, Australia, and New Zealand, by using the principal component analysis (PCA) approach. This comprehensive EMI index has four important components: (1) energy trade liberalization; (2) energy infrastructure development; (3) energy market liberalization; and (4) energy pricing liberalization. This index is constructed in two steps. I first construct the four indicators using PCA. After the predicted observation for the four indicators are obtained, I once again adopt the PCA method to calculate the EMI index. The scores show that countries like Japan and New Zealand have the highest extent of energy market integration. In contrast, countries like China and Malaysia, and India have lowest scores of EMI. Poorer countries are located in between. Such results are robust to different measures or data adopted.

Suggested Citation

  • Miaojie Yu, . "Measure the Energy Market Integration in East Asia: A Principal Component Analysis Approach," Chapters,, Economic Research Institute for ASEAN and East Asia (ERIA).
    • Handle: RePEc:era:chaptr:2010-rpr-25-03
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    References listed on IDEAS

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    1. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
    2. Ligang Song & Yu Sheng, 2008. "The Impact of Reform on Economic Growth in China: A Principal Component Analysis," WIDER Working Paper Series RP2008-12, World Institute for Development Economic Research (UNU-WIDER).
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    Cited by:

    1. Widodo, Tri, 2016. "Comparative Advantage of Energy Products in the Midst of ASEAN Economic Integration," MPRA Paper 79964, University Library of Munich, Germany.
    2. Dandan ZHANG & Xunpeng SHI & Yu SHENG, 2014. "Enhanced Measurement of Energy Market Integration in East Asia: An Application of Dynamic Principal Component Analysis," Working Papers DP-2014-23, Economic Research Institute for ASEAN and East Asia (ERIA).
    3. repec:era:chaptr:2013-rpr-29-10 is not listed on IDEAS
    4. Zhang, Dandan & Shi, Xunpeng & Sheng, Yu, 2015. "Comprehensive measurement of energy market integration in East Asia: An application of dynamic principal component analysis," Energy Economics, Elsevier, vol. 52(PB), pages 299-305.

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