Real and financial integrations among China's Pan Pearl River Delta and ASEAN

Abstract

This paper investigates the real and financial integration among China's Pan Pearl River Delta and ASEAN countries based on empirical tests of real interest parity, uncovered interest parity, and relative purchasing power parity (PPP). If interest parities can be found, it could be interpreted as financial integration; whilst if PPP is supported by the empirical data, it could be regarded as real integration among these economies. If both real and financial integrations could be established empirically, it would provide some evidence to support the development of a free trade zone among ASEAN and China's Pan Pearl River Delta (Pan-PRD) 9+2 regions, which include the nine Chinese provinces of Guangdong, Guangxi, Yunnan, Hainan, Guizhou, Jiangxi, Fujian, Zhejiang and Sichuan, and the two Special Administrative Regions, namely Hong Kong and Macau.