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Financial Integration between China and Asia Pacific Trading Partners: Parities Evidence from the First- and Second-generation Panel Tests

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  • Chan, Tze-Haw
  • Baharumshah, Ahmad Zubaidi

Abstract

This paper presents a joint investigation of the international parity conditions between China and her 13 major trading partners in the Asia Pacific over globalization era. Several advanced tests of unit root for univariate and panel series are utilized in the analyses. Our findings reveal that first, RIP holds stronger than PPP among APEC-China. Second, both parities tend to hold better as one move to the recent years, attributed not only to the financial liberalization process among APEC economies, but also to the Chinese trade policy and the regional commitment for the ASEAN+3+2+1 cooperation. Third, China and APEC have improved the ability to absorb regional shocks as indicated by the shortened half-life reported over time, especially when the post-Asia crisis era is included.

Suggested Citation

  • Chan, Tze-Haw & Baharumshah, Ahmad Zubaidi, 2012. "Financial Integration between China and Asia Pacific Trading Partners: Parities Evidence from the First- and Second-generation Panel Tests," MPRA Paper 37801, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37801
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    File URL: https://mpra.ub.uni-muenchen.de/37801/1/MPRA_paper_37801.pdf
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    References listed on IDEAS

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    Cited by:

    1. Chan, Tze-Haw, 2012. "Assessing the international parity conditions and transmission mechanism for Malaysia-China," MPRA Paper 38930, University Library of Munich, Germany.

    More about this item

    Keywords

    PPP; RIP; Panel Unit Root Tests; Mean Reversion; Half-life; Financial Integration;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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