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Cross-Border Price Differentials and Goods Market Integration in East Asia

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  • Moon, Woosik

    (Asian Development Bank Institute)

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    Abstract

    As cross-border movements of goods, capital, and labor are intensifying, it is likely that goods markets in East Asia will become increasingly integrated. This study investigates the current state of goods market integration in East Asia by measuring the extent of cross-border price differentials. Specifically, this study shows that compared with the European Union, East Asian markets are neither sufficiently integrated nor are they showing any price convergence over time.

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    File URL: http://www.adbi.org/files/2013.06.27.wp426.price.differentials.market.integration.east.asia.pdf
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    Bibliographic Info

    Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 426.

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    Length: 34 pages
    Date of creation: 27 Jun 2013
    Date of revision:
    Handle: RePEc:ris:adbiwp:0426

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    Keywords: market integration; east asia; cross-border price differentials; price convergence; regionalization; exchange rate fluctuation; income gap;

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    References

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    1. Charles Engel & John H. Rogers, 1995. "How wide is the border?," Research Working Paper, Federal Reserve Bank of Kansas City 95-09, Federal Reserve Bank of Kansas City.
    2. Stephen Cecchetti & Nelson C. Mark & Robert Sonora, 1998. "Price Level Convergence Among United States Cities: Lessons for the European Central Bank," Working Papers 32, Oesterreichische Nationalbank (Austrian Central Bank).
    3. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "A panel project on purchasing power parity: Mean reversion within and between countries," Journal of International Economics, Elsevier, vol. 40(1-2), pages 209-224, February.
    4. Engel, C. & Rogers, J.H., 1996. "Regional Patterns in the Law of One Price: The Roles of Geography vs. Currencies," Working Papers, University of Washington, Department of Economics 96-01, University of Washington, Department of Economics.
    5. Hanson, Gordon H, 1998. "North American Economic Integration and Industry Location," Oxford Review of Economic Policy, Oxford University Press, vol. 14(2), pages 30-44, Summer.
    6. David Romer, 1991. "Openness and inflation: theory and evidence," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Nov.
    7. Xavier Sala-i-Martin & Jeffrey Sachs, 1991. "Fiscal Federalism and Optimum Currency Areas: Evidence for Europe From the United States," NBER Working Papers 3855, National Bureau of Economic Research, Inc.
    8. Irving B. Kravis & Robert E. Lipsey, 1982. "Towards an Explanation of National Price Levels," NBER Working Papers 1034, National Bureau of Economic Research, Inc.
    9. Jose De Gregorio & Alberto Giovannini & Holger C. Wolf, 1993. "International Evidence on Tradables and Nontradables Inflation," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 93-17, New York University, Leonard N. Stern School of Business, Department of Economics.
    10. Parsley, David C & Wei, Shang-Jin, 1996. "Convergence to the Law of One Price without Trade Barriers or Currency Fluctuations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(4), pages 1211-36, November.
    11. David C. Parsley & Shang-Jin Wei, 2001. "Limiting Currency Volatility to Stimulate Goods Market Integration: A Price Based Approach," NBER Working Papers 8468, National Bureau of Economic Research, Inc.
    12. Capannelli, Giovanni & Lee, Jong-Wha & Petri, Peter, 2009. "Developing Indicators for Regional Economic Integration and Cooperation," Working Papers on Regional Economic Integration 33, Asian Development Bank.
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    Cited by:
    1. Neil Balchin, Lawrence Edwards and Asha Sundaram, 2014. "A Disaggregated Analysis of Product Price Integration in the Southern African Development Community," Working Papers 421, Economic Research Southern Africa.

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