Rockets and Feathers Revisited: An International Comparison on European Gasoline Markets
34 Pages Posted: 7 Feb 2002
Date Written: January 2002
Abstract
This paper re-examines the issue of asymmetries in the transmission of shocks to crude oil prices onto the retail price of gasoline. Relative to the previous literature, the distinguishing features of the present paper are: i) use of updated and comparable data to carry out an international comparison of gasoline markets; ii) two-stage modeling of the transmission of oil price shocks to gasoline prices (first refinery stage and second distribution stage), in order to assess possible asymmetries at either one or both stages; iii) use of asymmetric error correction models to distinguish between asymmetries that arise from short-run deviations in input prices and from the speed at which the gasoline price reverts to its long-run level; iv) explicit, possibly asymmetric, role of the exchange rate, as crude oil is paid for in dollars whereas gasoline sells for different sums of national currencies; v) bootstrapping of F tests of asymmetries, in order to overcome the low-power problem of conventional testing procedures. In contrast to several previous findings, the results generally point to widespread differences in both adjustment speeds and short-run responses when input prices rise or fall.
Keywords: Gasoline prices, speed of adjustment, asymmetric adjustment, exchange rate
JEL Classification: C220, D400, Q400
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Econometric Models of Asymmetric Price Transmission
By Matteo Manera and Giliola Frey
-
Asymmetric Error Correction Models for the Oil-Gasoline Price Relationship
By Matteo Manera and Margherita Grasso
-
Cost Pass-Through in the U.S. Coffee Industry
By Ephraim Leibtag, Alice Orcutt Nakamura, ...
-
Understanding the Competitiveness Implications of Future Phases of EU ETS on the Industrial Sectors
-
Exchange Rate Pass-through in Central and Eastern European Member States
By John Beirne and Martin Bijsterbosch
-
Cost Pass-Through of the EU Emissions Allowances: Examining the European Petroleum Markets
-
Non-Linear Price Transmission Between Gasoline Prices and Crude Oil Prices
By Tigran Poghosyan and Gerard H. Kuper