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Testing for Energy Market Integration in China

Author

Listed:
  • Hengyun Ma

    () (University of Canterbury)

  • Les Oxley

    () (University of Canterbury)

  • John Gibson

    () (Motu Economic and Public Policy Research and The University of Waikato)

Abstract

This 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.

Suggested Citation

  • Hengyun Ma & Les Oxley & John Gibson, 2009. "Testing for Energy Market Integration in China," Working Papers 09_03, Motu Economic and Public Policy Research.
  • Handle: RePEc:mtu:wpaper:09_03
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    References listed on IDEAS

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    Cited by:

    1. Ma, Hengyun & Oxley, Les & Gibson, John, 2009. "Gradual reforms and the emergence of energy market in China: Evidence from tests for convergence of energy prices," Energy Policy, Elsevier, vol. 37(11), pages 4834-4850, November.
    2. Sharma, Atul, 2011. "A comprehensive study of solar power in India and World," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(4), pages 1767-1776, May.
    3. King, Robert P. & Hand, Michael S. & DiGiacomo, Gigi & Clancy, Kate & Gomez, Miguel I. & Hardesty, Shermain D. & Lev, Larry & McLaughlin, Edward W., 2010. "Comparing the Structure, Size, and Performance of Local and Mainstream Food Supply Chains," Economic Research Report 246989, United States Department of Agriculture, Economic Research Service.
    4. Buchanan, Kathryn & Russo, Riccardo & Anderson, Ben, 2015. "The question of energy reduction: The problem(s) with feedback," Energy Policy, Elsevier, vol. 77(C), pages 89-96.
    5. Ma, Hengyun & Oxley, Les & Gibson, John, 2009. "Substitution possibilities and determinants of energy intensity for China," Energy Policy, Elsevier, vol. 37(5), pages 1793-1804, May.

    More about this item

    Keywords

    China; Energy; Market integration; Price convergence; Time series tests;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; 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

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