Measuring Regional Market Integration in Developing Asia: a Dynamic Factor Error Correction Model (DF-ECM) Approach

Duo Qin, Marie Anne Cagas (), Geoffrey Ducanes, Nedelyn Magtibay-Ramos () and Pilipinas F. Quising ()
Additional contact information
Marie Anne Cagas: University of the Philippines
Nedelyn Magtibay-Ramos: Asian Development Bank, Postal: 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines,
Pilipinas F. Quising: Asian Development Bank, Postal: 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines,

No 8, Working Papers on Regional Economic Integration from 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.

Keywords: Law of one price; market integration; dynamic factor; error-correction model (search for similar items in EconPapers)
JEL-codes: C22 C33 F15 F31 F40 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2007-05-01
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Citations: View citations in EconPapers (13)

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