Asymmetric Price Adjustment and the Effect of Structural Reforms in the Gasoline Market in Greece

Abstract

Efficient pricing in the gasoline market has often been the subject of public debate in Greece during the recent years. The present paper: (a) Investigates the possible existence of asymmetric adjustment of gasoline prices to oil price variations in the Greek market in the recent years, thus contributing to the relevant literature. (b) Examines whether the structural reforms that took place in the gasoline market in the post-2010 period had any impact on the pricing dynamics of the market. To this end, the analysis applies the TAR-ECM cointegration technique, which is considered to be the most robust econometric method for identifying such kind of asymmetries, and makes use of observations at the lowest frequency available. The results provide evidence in favour of symmetric behaviour for the period following the structural reforms in the market, but not for the period before the reforms. This could be due to the change of the behaviour of the market participants as a result of the new institutional framework.

Keywords: Asymmetry, Gasoline, Crude Oil, Threshold Cointegration

JEL Classification: Q40, Q43, Q48