Chinese Domestic Regional Price Differential And Market Integration An Empirical Study Based On Panel Data

This paper defined market integration as a longer-term price convergence trend with certainty and stability. Based on the 22 kinds of goods’provincial monthly price data from 2007 to 2013, by constructing absolute price dispersion coefficient time series and relative price panel as well as processing several groups of unit root test, the paper performed a description and judgment on the situation of Chinese domestic price differential as well as the status of regional market integration, which is clarified into 7 different stages based on four dimensions, namely:integration, segmentation, with integrated (segmented) trends, integration (segmented) homeostasis, and disorder.Study found that Chinese’s domestic market is not high degree of integration:Steel, non-ferrous metals, gasoline, diesel fuel and other commodities have the presence of integration or integration trend, but transport costs and other factors may have impact on similar goods such as ethanol and sulfuric acid, causing different result; Food market is kind of segmentation; Timber is showing a trend of market segmentation; While the vast majority of goods does not reflect a significant market integration or segmentation.If policies aim to reduce the cost of arbitrage between regions and between futures and spot, it may also contribute to the promotion of regional market integration, which has been reflected in the steel and non-ferrous metals market. Since China commodity prices have not yet entered the mature stage, increasing the sample size, using updated data, and dividing interval will increase the reliability of conclusions. Regional market integration study is a dynamic process, with the goal of long-term trends will be more valuable.