Testing for Energy Market Integration in China
AbstractThis 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; and that once some geographically isolated regions are excluded, we can regard the coal market as integrated; however, the electricity market 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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Bibliographic InfoPaper provided by Motu Economic and Public Policy Research in its series Working Papers with number 09_03.
Length: 29 pages
Date of creation: Mar 2009
Date of revision:
China; Energy; Market integration; Price convergence; Time series tests;
Other versions of this item:
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-03 (All new papers)
- NEP-ENE-2009-07-03 (Energy Economics)
- NEP-TRA-2009-07-03 (Transition Economics)
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