Dr. WOO Kai YinDr. LEE Shu KamWong, JackyJackyWong2021-02-162021-02-162019Woo, K. Y., Lee, S. K., & Wong, J. (18 Jul 2019). Greater Bay Area: Price convergence of product. International Conference: Theoretical and Applied Econometrics, Hong Kong Shue Yan University, Hong Kong.http://hdl.handle.net/20.500.11861/6288The development of the Guangdong-Hong Kong-Macau Greater Bay Area (GBA, 粵港澳大灣區) purports to increase trade flow and promote economic integration between Hong Kong, Macau and the other nine cities in Guangdong Province – Dongguan ( 東莞 ), Foshan ( 佛山 ), Guangzhou (廣州), Huizhou (惠州), Jiangmen (江門), Shenzhen (深圳), Zhaoqing (肇慶), Zhongshan (中山) and Zhuhai (珠海). The principal goal of this GBA is to develop a functionally integrated productive and competitive city cluster within which each GBA city can interact harmoniously and complementarily. This GBA initiative, like the European Union, is an ideal experimental platform for regional economic convergence and economic union in which the mobility of both goods and people are perfect in the longer term. The theory of purchasing power parity is a widely accepted conceptual framework for designing and operationalising empirical tests to assess economic convergence criteria. In this paper, we apply Threshold Vector Error Correction Model to study the PPP and the degree of regional price convergence in the GBA. It is observed that due the existence of transaction costs, the effect of linear convergence is weak but strong evidence of nonlinear price convergence is found. The implication is that efforts should be put on reducing transaction costs.enConference Paper