IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/70592.html
   My bibliography  Save this paper

Is There Any Regional Price Disparity in Peninsular Malaysia?

Author

Listed:
  • Lee, Chin

Abstract

This study examines whether there are significant differences in prices across four regions in Peninsular Malaysia, namely Northern, Central, Southern, and Eastern Peninsular Malaysia. Disaggregate monthly consumer price indices for twelve types of goods and services from July 2010 to February 2013 were analyzed. Based on the Levin and Lin (1993) panel unit root test, this study found statistical evidence of price convergence among the four zones for two-thirds of the price groups. Most importantly, price convergence exists for three major consumers’ expenditures items: Food and Non-Alcoholic Beverages; Housing, Water, Electricity, Gas and Other Fuels; and Transport. Indeed, these eight price groups that converged comprised 83.6% of total consumer expenditures. Evidence of price convergence among these price groups suggests that Peninsular Malaysia markets are highly integrated. In addition, this study found that the half-life for the tradable goods is roughly 2-3 months and for nontradable goods about 5-10 months. These findings indicate that tradable goods prices adjust more rapidly than nontradable goods do.

Suggested Citation

  • Lee, Chin, 2015. "Is There Any Regional Price Disparity in Peninsular Malaysia?," MPRA Paper 70592, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:70592
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/70592/1/MPRA_paper_70592.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Josep LluIs Carrion-I-Silvestre & Tomas Del Barrio & Enrique Lopez-Bazo, 2004. "Evidence on the purchasing power parity in a panel of cities," Applied Economics, Taylor & Francis Journals, vol. 36(9), pages 961-966.
    2. Giovannini, Alberto, 1988. "Exchange rates and traded goods prices," Journal of International Economics, Elsevier, vol. 24(1-2), pages 45-68, February.
    3. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-1125, December.
    4. Engel, Charles & Rogers, John H, 2001. "Violating the Law of One Price: Should We Make a Federal Case Out of It?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 1-15, February.
    5. Y. Oh & K. Han, 2009. "Purchasing power parity in Korean city panels with disaggregate price indices," Applied Economics Letters, Taylor & Francis Journals, vol. 16(1), pages 45-49.
    6. Stephen G. Cecchetti & Nelson C. Mark & Robert J. Sonora, 2002. "Price Index Convergence Among United States Cities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1081-1099, November.
    7. Janet Ceglowski, 2003. "The law of one price: intranational evidence for Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 373-400, May.
    8. Jenkins, Michael A, 1997. "Cities, Borders, Distances, Non-traded Goods and Purchasing Power Parity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(2), pages 203-213, May.
    9. Viera Chmelarova & Hiranya K. Nath, 2008. "Do regions matter for the behavior of city relative prices in the U. S.?," Working Papers 0803, Sam Houston State University, Department of Economics and International Business.
    10. Geoffrey M. B. Tootell, 1992. "Purchasing power parity within the United States," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 15-24.
    11. David C. Parsley & Shang-Jin Wei, 1996. "Convergence to the Law of One Price Without Trade Barriers or Currency Fluctuations," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1211-1236.
    12. Chen, L. L. & Devereux, J., 2003. "What can US city price data tell us about purchasing power parity?," Journal of International Money and Finance, Elsevier, vol. 22(2), pages 213-222, April.
    13. Nagayasu, Jun & Inakura, Noriko, 2009. "PPP: Further evidence from Japanese regional data," International Review of Economics & Finance, Elsevier, vol. 18(3), pages 419-427, June.
    14. Woo, Kai-Yin & Lee, Shu-Kam, 2009. "Detecting intra-national PPP model in China: A median-unbiased estimation approach," Economic Modelling, Elsevier, vol. 26(5), pages 1029-1032, September.
    15. Poomthan Rangkakulnuwat & A. K. M. Mahbub Morshed & H. Holly Wang & Sung K. Ahn, 2012. "Price convergence in US cities: a cointegration approach with two structural breaks," Applied Economics, Taylor & Francis Journals, vol. 44(14), pages 1849-1862, May.
    16. Robert J. Sonora, 2008. "Bivariate relative city price convergence in the United States: 1918–1997," Review of Financial Economics, John Wiley & Sons, vol. 17(2), pages 92-111.
    17. Robert J. Sonora, 2005. "City CPI Convergence in Mexico," Review of Development Economics, Wiley Blackwell, vol. 9(3), pages 359-367, August.
    18. Kausik Chaudhuri & Jeffrey Sheen, 2004. "Purchasing Power Parity Across States and Goods Within Australia," The Economic Record, The Economic Society of Australia, vol. 80(250), pages 314-329, September.
    19. Morshed, A.K.M. Mahbub & Ahn, Sung K. & Lee, Minsoo, 2006. "Price convergence among Indian cities: A cointegration approach," Journal of Asian Economics, Elsevier, vol. 17(6), pages 1030-1043, December.
    20. Isard, Peter, 1977. "How Far Can We Push the "Law of One Price"?," American Economic Review, American Economic Association, vol. 67(5), pages 942-948, December.
    21. Esaka, Taro, 2003. "Panel unit root tests of purchasing power parity between Japanese cities, 1960-1998: disaggregated price data," Japan and the World Economy, Elsevier, vol. 15(2), pages 233-244, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lee, Chin & Habibullah, Muzafar Shah, 2008. "Price convergence and market integration: evidence from Malaysia," MPRA Paper 40408, University Library of Munich, Germany.
    2. Ana Iregui & Jesús Otero, 2011. "Testing the law of one price in food markets: evidence for Colombia using disaggregated data," Empirical Economics, Springer, vol. 40(2), pages 269-284, April.
    3. Bruce Cater & Byron Lew, 2018. "The impact of climate on the law of one price: A test using North American food prices from the 1920s," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(4), pages 1191-1220, November.
    4. Chmelarova, Viera & Nath, Hiranya K., 2010. "Relative price convergence among US cities: Does the choice of numeraire city matter?," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 405-414, March.
    5. Hiranya K. Nath & Jayanta Sarkar, 2014. "City Relative Price Dynamics in Australia: Are Structural Breaks Important?," The Economic Record, The Economic Society of Australia, vol. 90(288), pages 33-48, March.
    6. repec:qut:auncer:2013_01 is not listed on IDEAS
    7. Hegwood, Natalie D. & Nath, Hiranya K., 2013. "Structural breaks and relative price convergence among US cities," Journal of Macroeconomics, Elsevier, vol. 36(C), pages 150-160.
    8. Burridge, Peter & Iacone, Fabrizio & Lazarová, Štěpána, 2015. "Spatial effects in a common trend model of US city-level CPI," Regional Science and Urban Economics, Elsevier, vol. 54(C), pages 87-98.
    9. Sule Akkoyunlu & Boriss Siliverstovs, 2014. "Does the law of one price hold in a high-inflation environment? A tale of two cities in Turkey," Applied Economics, Taylor & Francis Journals, vol. 46(26), pages 3236-3245, September.
    10. Wimanda, Rizki E., 2009. "Price variability and price convergence: Evidence from Indonesia," Journal of Asian Economics, Elsevier, vol. 20(4), pages 427-442, September.
    11. Crucini, Mario J. & Shintani, Mototsugu, 2008. "Persistence in law of one price deviations: Evidence from micro-data," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 629-644, April.
    12. Kitenge, Erick M. & Morshed, A.K.M. Mahbub, 2019. "Price convergence among Indian cities: The role of linguistic differences, topography, and aggregation," Journal of Asian Economics, Elsevier, vol. 61(C), pages 34-50.
    13. Hiranya K. Nath & Jayanta Sarkar, 2009. "Unbiased Estimation of the Half-Life to Price Index Convergence among U.S. Cities," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(5), pages 1041-1046, August.
    14. Linhui Yu & Jiangyong Lu & Pinliang Luo, 2013. "The Evolution of Price Dispersion in China's Passenger Car Markets," The World Economy, Wiley Blackwell, vol. 36(7), pages 947-965, July.
    15. Jun Nagayasu, 2017. "Regional inflation, spatial locations and the Balassa-Samuelson effect: Evidence from Japan," Urban Studies, Urban Studies Journal Limited, vol. 54(6), pages 1482-1499, May.
    16. Huang, Ho-Chuan (River) & Liu, Wei-Han & Yeh, Chih-Chuan, 2012. "Convergence in price levels across US cities," Economics Letters, Elsevier, vol. 114(3), pages 245-248.
    17. Sule Akkoyunlu & Boriss Siliverstovs, 2010. "Does the Law of One Price Hold in a High-Inflation Environment?," KOF Working papers 10-248, KOF Swiss Economic Institute, ETH Zurich.
    18. LAN, Yuexing & SYLWESTER, Kevin, 2010. "Does the law of one price hold in China? Testing price convergence using disaggregated data," China Economic Review, Elsevier, vol. 21(2), pages 224-236, June.
    19. Ho-Chuan Huang & Pei-Chien Lin & Chih-Chuan Yeh, 2011. "Price level convergence across cities? Evidence from panel unit root tests," Applied Economics Letters, Taylor & Francis Journals, vol. 18(1), pages 87-93.
    20. Syed A. Basher & Josep Lluis Carrión-i-Silvestre, 2008. "Price level convergence, purchasing power parity and multiple structural breaks: An application to US cities," Working Papers XREAP2008-08, Xarxa de Referència en Economia Aplicada (XREAP), revised Jul 2008.
    21. Nagayasu, Jun, 2014. "Regional inflation, spatial location and the Balassa-Samuelson effect," MPRA Paper 59220, University Library of Munich, Germany.

    More about this item

    Keywords

    regional price disparity; price convergence; half-life; speed of adjustment; panel unit root test;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:70592. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.