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Market Integration Dynamics and Asymptotic Price Convergence in Distribution

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García Hiernaux, Alfredo and David E. , Guerrero and McAleer, Michael (2013) Market Integration Dynamics and Asymptotic Price Convergence in Distribution. [ Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 28, 2013, ] (Unpublished)

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Official URL: http://eprints.ucm.es/22705/


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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.


Item Type:Working Paper or Technical Report
Additional Information:

JEL: C22, C32, N70, F15.

Revised: August 2013.

Uncontrolled Keywords:Regional and global markets, Integration, Asymptotic price convergence, Mean, Variance, Distribution.
Subjects:Social sciences > Economics > Econometrics
Series Name:Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE)
Volume:2013
Number:28
ID Code:22705
Deposited On:03 Sep 2013 11:35
Last Modified:09 Jan 2014 11:45

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