Publication:
Do retail gasoline prices rise more readily than they fall? A threshold cointegration approach
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Date
2007
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Abstract
This paper revisits the controversy over whether retail gasoline prices respond to increases in upstream prices more rapidly than decreases. Using threshold and momentum models of cointegration and daily data at different stages in the distribution chain, we find that transmission between upstream and downstream prices is mostly asymmetric in the momentum model: increases in upstream prices are passed on to downstream prices more quickly than decreases. We distinguish between small and large shocks and show that the asymmetry is more pronounced for small shocks, which may be due to consumer search costs.
Keywords
Gasoline prices , Asymmetric adjustment
Citation
Al-Gudhea, S., Kenc, T., & Dibooglu, S. (2007). Do retail gasoline prices rise more readily than they fall? A threshold cointegration approach. Journal of Economics and Business, 59 (6), pp. 560-574.
Publisher
Elsevier B.V.