Unveiling the Role of Price Variation in Shaping European Market Integration: A Panel Data Perspective

Abstract

This study investigates the relationship between price variation and European market integration using a comprehensive data set on 27 European countries for the period of 1996 to 2020. The prime motive of this study is highlighting the role of price variation in affecting the market integration process within the European economies. This study employing the quantile regression approach to assess the extent to which price variation (PV) effect the level of integration in various European economies. The results of the quantile regression approach indicate that price variation, Gross Domestic Product (GDP), distance (DIS), trade barriers (TB), and institutional quality (IQ) are significant causing elements of market integration. This study finds that PV, DIS and IQ are negative related with market integration at all levels. Further, the empirical result also shows that with successive quantiles, the size of the PV, DIS and IQ coefficient are growing, which indicate that the effect of these factors are bigger in countries with high amount of market integration. On the contrary, the result of quantile regression shows the direct link of GDP with market integration at all levels. In addition, with successive quantiles, the extent of the GDP coefficient is growing, which intend that the effect of GDP is greater in countries with greater amount of market integration. Moreover, the results of this study also imply that TB inversely affect market integration at all quantiles. The findings from this study offer valuable insights for policymakers and market participants for better understanding of the dynamics of European market integration.