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Asymmetric oil product pricing in India: Evidence from a multiple threshold nonlinear ARDL model

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  • Pal, Debdatta
  • Mitra, Subrata K.

Abstract

This article examines the potential asymmetric transmission from crude to oil product prices in India. Instead of linking oil product pricing only with rise and fall of crude price, this article analyzes the effect of crude price fluctuations by decomposing the crude price changes in quantiles by holding multiple thresholds. Use of multiple threshold nonlinear autoregressive distributed lag (MTNARDL) model improves precision in estimating the asymmetric effect of the crude price changes on oil product prices over that of the single threshold NARDL model. It is observed that the asymmetric price transmission is high across all oil products, when higher and lower quantiles of crude price fluctuations are compared. This shows that the price of oil products increases when crude prices go up; however, the advantage of the sharp fall of crude prices is not fully transmitted to the oil products.

Suggested Citation

  • Pal, Debdatta & Mitra, Subrata K., 2016. "Asymmetric oil product pricing in India: Evidence from a multiple threshold nonlinear ARDL model," Economic Modelling, Elsevier, vol. 59(C), pages 314-328.
    • Handle: RePEc:eee:ecmode:v:59:y:2016:i:c:p:314-328
    DOI: 10.1016/j.econmod.2016.08.003
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    More about this item

    Keywords

    Asymmetric price transmission; Oil product; MTNARDL; India;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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