Market Integration Dynamics and Asymptotic Price Convergence in Distribution

Alfredo Garcia-Hiernaux, David Guerrero (davidesg@ucm.es) and Michael McAleer

No 2013-28, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: In this paper we analyse the market integration process of the relative price distribution, develop a model to analyze market integration, and present a formal test of increasing market integration. We distinguish between the economic concepts of price convergence in mean and in variance. When both types of convergence occur, prices are said to converge in distribution. We present concepts and denitions related to the market integration process, link this to price convergence in distribution, argue that the Law of One Price (LOP) is not a sucient condition for market integration, and present a formal test of price convergence in distribution. In the empirical analysis, we analyze integration of the inland grains market in 19th Century USA.

Keywords: Regional and global markets; Integration; Asymptotic price convergence; Mean; Variance; Distribution. (search for similar items in EconPapers)
JEL-codes: C22 C32 F15 N70 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2013, Revised 2013-08
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://eprints.ucm.es/id/eprint/22705/1/1328.pdf (application/pdf)

Related works:
Journal Article: Market integration dynamics and asymptotic price convergence in distribution (2016)
Working Paper: Market Integration Dynamics and Asymptotic Price Convergence in Distribution (2015)
Working Paper: Market Integration Dynamics and Asymptotic Price Convergence in Distribution (2015)
Working Paper: Market Integration Dynamics and Asymptotic Price Convergence in Distribution (2013)
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