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Evidence of price convergence within the greater bay area in China using nonparametric tests
Author(s)
Date Issued
2021
Citation
Woo, K. Y., & Lee, S. K. (2021 Mar 24). Evidence of price convergence within the greater bay area in China using nonparametric tests. The International Conference of Evolution of Digital Entrepreneurship, FinTech and FinReg, Hong Kong Shue Yan University.
Type
Conference Paper
Abstract
Our paper focuses upon empirical study on the extent of goods market integration within the
Greater Bay Area (GBA). Purchasing power parity (PPP) implies a high degree of goods market
integration in the economies under examination, which are recognized as necessary conditions for
the imminent formation of an integrated city cluster and even the closer economic integration in
the future. The existence of PPP relationships is a prerequisite for a high probability of success in
developing the GBA into a tightly knit world-class city cluster in the longer term. This paper
examines the PPP within the GBA from July 2012 to December 2019. Since the PPP long-run
relationships may not be exact or linear, we adopt the non-parametric rank tests for analysis which
do not require prior knowledge and specification of the linear or nonlinear functional form. Our
results validate the PPP in the long run with limited evidence of nonlinearity in the data.
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