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Measuring Regional Market Integration in Developing Asia: a Dynamic Factor Error Correction Model (DF-ECM) Approach

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Author Info

  • Qin, Duo

    ()
    (Queen Mary, University of London)

  • Cagas, Marie Anne

    ()
    (University of the Philippines)

  • Ducanes, Geoffrey

    (School of Economics)

  • Magtibay-Ramos, Nedelyn

    ()
    (Asian Development Bank)

  • Quising, Pilipinas F.

    ()
    (Asian Development Bank)

Abstract

This paper examines empirically the dynamic process of regional market integration in twelve Asian economies using a new modeling approach combining DF with ECM. This approach enables us to obtain latent regional dynamic factors which correspond well with the 'foreign' parity variables in theory when a market is imperfectly integrated and which act, in explaining domestic short-run price adjustments, as leading-indicators in an errorcorrection form. The power of the DF-ECM approach is illustrated in its application to measuring market integration in the developing Asian region using monthly data from the past decade.

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Bibliographic Info

Paper provided by Asian Development Bank in its series Working Papers on Regional Economic Integration with number 8.

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Length: 38 pages
Date of creation: 01 May 2007
Date of revision:
Handle: RePEc:ris:adbrei:0008

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Related research

Keywords: Law of one price; market integration; dynamic factor; error-correction model;

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References

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Citations

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Cited by:
  1. Qin, Duo & He, Xinhua, 2012. "Modelling the impact of aggregate financial shocks external to the Chinese economy," BOFIT Discussion Papers 25/2012, Bank of Finland, Institute for Economies in Transition.
  2. Qin, Duo & Tan, Tao, 2009. "How much intraregional exchange rate variability could a currency union remove? The case of ASEAN+3," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1793-1803, October.
  3. Warwick McKibbin & Waranya Pim Chanthapun, 2009. "Exchange Rate Regimes in the Asia-Pacific Region and the Global Financial Crisis," CAMA Working Papers 2009-30, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  4. Vinokurov, Evgeny, 2010. "The System of Indicators of Eurasian Integration," MPRA Paper 22227, University Library of Munich, Germany.
  5. Vinokurov, Evgeny, 2009. "Systema Indikatorov Evraziyskoy Integracii
    [The System of Indicators of Eurasian Integration]
    ," MPRA Paper 20914, University Library of Munich, Germany.
  6. Madhur, Srinivasa & Wignaraja, Ganeshan & Darjes, Peter, 2009. "Roads for Asian Integration: Measuring ADB's Contribution to the Asian Highway Network," Working Papers on Regional Economic Integration 37, Asian Development Bank.
  7. Rigg, Robert & Schou-Zibell, Lotte, 2009. "The Financial Crisis and Money Markets in Emerging Asia," Working Papers on Regional Economic Integration 38, Asian Development Bank.
  8. Schou-Zibell, Lotte & Madhur, Srinivasa, 2010. "Regulatory Reforms for Improving the Business Environment in Selected Asian Economies - How Monitoring and Comparative Benchmarking Can Provide Incentive for Reform," Working Papers on Regional Economic Integration 40, Asian Development Bank.

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