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Limited Information Bayesian Analysis of a Simultaneous Equation with an Autocorrelated Error Term and its Application to the U.S. Gasoline Market

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Author Info
Stanislav Radchenko (University of North Carolina at Charlotte)

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Abstract

Using Markov Chain Monte Carlo algorithms within the limited information Bayesian framework, we estimate the parameters of the structural equation of interest and test weak exogeneity in a simultaneous equation model with white noise as well as autocorrelated error terms. A numerical example and an estimation of the supply and demand equations of the U.S. gasoline market show that if we ignore autocorrelation we obtain unreasonable posterior distributions of the parameters of interest. Also we find that the hypothesis of the asymmetric effect of the changes in oil price on the changes in gasoline price is rejected. Oil inventory has a significant negative effect on the gasoline price.

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Paper provided by EconWPA in its series Econometrics with number 0408001.

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Length: 41 pages
Date of creation: 02 Aug 2004
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Handle: RePEc:wpa:wuwpem:0408001

Note: Type of Document - pdf; pages: 41
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Related research
Keywords: limited information Bayesian estimation; exogeneity; identifying restrictions; MCMC algorithms; U.S. gasoline market;

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Find related papers by JEL classification:
C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis
C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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    Other versions:
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    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Wlaslowski, Szymon & Binner, Jane & Guiletti, Monica & Joseph, Nathan & Nilsson, Birger, 2007. "New York mark-ups on petroleum products," Working Papers 2008:2, Lund University, Department of Economics. [Downloadable!]
  2. Stanislav Radchenko, 2004. "Lags in the response of gasoline prices to changes in crude oil," Econometrics 0406001, EconWPA. [Downloadable!]
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