Testing for Energy Market Integration in China

Hengyun Ma, Les Oxley and John Gibson

No 09_03, Working Papers from Motu Economic and Public Policy Research

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.

Keywords: China; Energy; Market integration; Price convergence; Time series tests (search for similar items in EconPapers)
JEL-codes: D24 O33 Q41 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2009-03
New Economics Papers: this item is included in nep-ene and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Testing for Energy Market Integration in China (2008)
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