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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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Cited by:
  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

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