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Testing for Energy Market Integration in China

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Author Info
Hengyun Ma
Les Oxley () (University of Canterbury)
John Gibson

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Abstract

The paper investigates energy market integration in China by employing univariate, and panel-based unit root tests and Granger causality tests applied to a new, energy price data set. We identify price series that converge either to absolute or relative price parity. In addition we estimate the rates (speed) at which relative prices converge to their long-run values, and the direction of causality. The results show that gasoline and diesel markets are very well integrated as a whole; that once some geographically isolated regions are excluded, we can regard the coal market as integrated; however, the electricity markets is not well integrated. The estimated intercept terms are all very small and close to zero, such that most of the relative price series can be regarded as convergent to absolute price parity. The convergence rates vary little and are relatively short when compared internationally. A rich set of causal relationships are established many showing bi-directional causality between regional centres.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/0812.pdf
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Publisher Info
Paper provided by University of Canterbury, Department of Economics in its series Working Papers in Economics with number 08/12.

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Length: 33 pages
Date of creation: 20 Jun 2008
Date of revision:
Handle: RePEc:cbt:econwp:08/12

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Related research
Keywords: China; Energy; Market integration; Price convergence; Time series tests;

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Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes
Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply

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