Taxation and the Asymmetric Adjustment of Selected Retail Energy Prices in the UK

14 Pages Posted: 14 Jun 2013 Last revised: 19 Sep 2013

See all articles by Matthew Greenwood-Nimmo

Matthew Greenwood-Nimmo

University of Melbourne; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Yongcheol Shin

University of York (UK) - Department of Economics and Related Studies

Date Written: September 4, 2013

Abstract

This paper investigates the adjustment of the prices of four key petroleum products in the UK following changes in the price of crude oil. We find significant evidence that the pre-tax prices of diesel, kerosene and gas oil adjust more rapidly in an upward than a downward direction but that the pre-tax price of unleaded petrol adjusts symmetrically. However, these patterns are obscured at the pump once one accounts for fuel duty and value added tax, raising the possibility that firms can use the tax system to conceal rent seeking behavior.

Keywords: Nonlinear ARDL (NARDL), Asymmetric Gasoline Price Adjustment, Rockets and Feathers Hypothesis

JEL Classification: C22, H23, Q40

Suggested Citation

Greenwood-Nimmo, Matthew and Shin, Yongcheol, Taxation and the Asymmetric Adjustment of Selected Retail Energy Prices in the UK (September 4, 2013). Economics Letters, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2278643 or http://dx.doi.org/10.2139/ssrn.2278643

Matthew Greenwood-Nimmo (Contact Author)

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

Yongcheol Shin

University of York (UK) - Department of Economics and Related Studies ( email )

Heslington
York, YO1 5DD
United Kingdom

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