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Implications of conceptual and data complexities on time-series econometric applications in market integration analysis

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  • Abunyuwah, Isaac

Abstract

This article demonstrates and highlights the conceptual limits of current empirical market integration (MI) time series models (threshold models) and their implications on market efficiency and competitive equilibrium conclusions. The complexities and diversities that characterise the analysis of the concept of market integration are evaluated within the framework of Enke-Samuelson-Takayama-Judge (ESTJ) spatial equilibrium theory. The efficiency and competiveness implications drawn from MI models are limited by how the data generation process (DGP) is influenced by equilibrium conditions, by the tradability restrictions of the inter-markets relationships and by the presence of unobserved transactions costs. However, empirical applications scarcely address these limitations. Two sets of synthesized data with varying levels of non-linear complexity implied by alternating equilibrium conditions are generated to demonstrate conceptual limits of current threshold models in market integration analysis. Inconsistent conclusions that linear representations imply for threshold propagated DGP will also apply for conclusions derived from threshold models if markets are characterised by switching equilibria conditions.

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  • Abunyuwah, Isaac, 2013. "Implications of conceptual and data complexities on time-series econometric applications in market integration analysis," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 115(1), pages 1-7, February.
    • Handle: RePEc:ags:stagec:146817
    DOI: 10.22004/ag.econ.146817
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    Cited by:

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    2. Isaac Abunyuwah & Henry De-Graft Acquah, 2013. "Modelling non-linear Spatial Market Integration and Equilibrium Processes in Hidden Markov Framework," Journal of Economics and Behavioral Studies, AMH International, vol. 5(8), pages 535-545.

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