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Asymmetric adjustment of retail gasoline prices in turkey to world crude oil price changes: the role of taxes

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Author Info

  • C. emre Alper

    ()
    (Bogazici University)

  • Orhan Torul

    ()
    (Bogazici University)

Abstract

We empirically investigate the impact of shocks to world crude oil prices on retail gasoline prices in Turkey during the 1991-2007 period. Using a Structural-VAR methodology and monthly frequency data, we report that Turkish retail gasoline prices respond significantly to increasing world crude oil prices, but not to decreases. During the estimation period, 70 to 80% of the retail gasoline price was attributable to taxes which were subject to frequent changes by the council of ministers. Although historical data on gasoline taxes is not publicly available, based on the importance of taxes on gasoline price formation in Turkey, we argue that the source of asymmetry is mainly attributable to government price setting policy choice for gasoline. Based on the observed asymmetry from empirical analysis, we further argue that rather than smoothing the impact of volatility in world crude oil prices on Turkish retail gasoline prices, the Turkish fiscal authorities attempted to maximize tax revenue from gasoline.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 2 ()
Pages: 775-787

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Handle: RePEc:ebl:ecbull:eb-09-00113

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Related research

Keywords: Retail gasoline prices; Rockets and feathers hypothesis; Emerging markets; Fiscal policy; SVAR; Retail diesel oil prices;

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Cited by:
  1. Torul Orhan & Alper C. Emre, 2010. "Asymmetric Effects of Oil Prices on the Manufacturing Sector in Turkey," Review of Middle East Economics and Finance, De Gruyter, De Gruyter, vol. 6(1), pages 90-105, July.
  2. Özgür Bor & Mustafa Ýsmihan, 2013. "Gasoline Pricing, Taxation and Asymmetry: The Case of Turkey," Working Papers, Turkish Economic Association 2013/7, Turkish Economic Association.

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