Measure the Energy Market Integration in East Asia: A Principal Component Analysis Approach

30 Pages Posted: 10 Aug 2011

See all articles by Miaojie Yu

Miaojie Yu

Peking University - China Center for Economic Research (CCER)

Date Written: July 13, 2011

Abstract

This paper measures the current energy market integration (EMI) in the East Asia 16 countries including the ASEAN 10 countries, China, Japan, Korea, India, Australia, and New Zealand by using the principal component analysis (PCA) approach. The comprehensive EMI index has four important components: (1) energy trade liberalization; (2) energy infrastructure development; (3) energy market liberalization; and (4) energy pricing liberalization. This is done by the two steps. I first construct the four indicators using the PCA approach, respectively. After the predicted observation for the four indicators are obtained, I once again adopt the PCA method to calculate the EMI index. The scores show that countries like Japan and New Zealand have the highest extents of energy market integration. In contrast, countries like China and Malaysia, and India have lowest scores of EMI. The CLMV countries are located in the between. Such results are robust by different measure or different data adopted.

Keywords: Energy Market Integration, East Asia, Principal Component Analysis

JEL Classification: F1, Q2, C1

Suggested Citation

Yu, Miaojie, Measure the Energy Market Integration in East Asia: A Principal Component Analysis Approach (July 13, 2011). Available at SSRN: https://ssrn.com/abstract=1907716 or http://dx.doi.org/10.2139/ssrn.1907716

Miaojie Yu (Contact Author)

Peking University - China Center for Economic Research (CCER) ( email )

Beijing, Beijing 100871
China
+86-10-6275-3109 (Phone)

HOME PAGE: http://mjyu.ccer.edu.cn

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