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Revisiting asymmetric price transmission in the U.S. oil-gasoline markets: A multiple threshold error-correction analysis

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  • Qin, Xiao
  • Zhou, Chunyang
  • Wu, Chongfeng

Abstract

This paper revisits the asymmetric price transmission in the U.S. oil-gasoline markets by a multiple threshold error-correction model. Unlike the previous studies, the regimes and thresholds are endogenously determined by sequential model selection. A nonlinear asymmetric pattern is discovered in the short-run price transmission from crude oil to retail gasoline, via both the commodity and financial markets. For medium movements in both oil prices, increases demonstrate a significantly stronger impact on retail gasoline prices than decreases. However, asymmetry is detected for neither large nor small oil price movements. Nonlinear asymmetric transmission via the refinery markets is excluded. Nevertheless, the long-run speed towards equilibrium does not exhibit asymmetry between any paired regimes. We discuss the economic interpretations and implications of the detected nonlinear asymmetry.

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  • Qin, Xiao & Zhou, Chunyang & Wu, Chongfeng, 2016. "Revisiting asymmetric price transmission in the U.S. oil-gasoline markets: A multiple threshold error-correction analysis," Economic Modelling, Elsevier, vol. 52(PB), pages 583-591.
    • Handle: RePEc:eee:ecmode:v:52:y:2016:i:pb:p:583-591
    DOI: 10.1016/j.econmod.2015.10.003
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    Cited by:

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    3. Moses Tule & Afees A. Salisu & Charles Chimeke, 2018. "You are what you eat: The role of oil price in Nigeria inflation forecast," Working Papers 040, Centre for Econometric and Allied Research, University of Ibadan.
    4. Ismail O. Fasanya & Abiodun Adetokunbo & Felix O. Ajayi, 2018. "Oil Revenue Shocks and the Current Account Balance Dynamics in Nigeria: New evidence from Asymmetry and Structural Breaks," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 68(4), pages 72-87, October-D.
    5. Zacharias Bragoudakis & Stavros Degiannakis & George Filis, 2019. "Oil and pump prices: is there any asymmetry in the Greek oil downstream sector?," Working Papers 268, Bank of Greece.
    6. Salisu, Afees A. & Isah, Kazeem O. & Oyewole, Oluwatomisin J. & Akanni, Lateef O., 2017. "Modelling oil price-inflation nexus: The role of asymmetries," Energy, Elsevier, vol. 125(C), pages 97-106.
    7. Taner SEKMEN & Seher Gülşah TOPUZ, 2021. "Asymmetric Oil Price and Exchange Rate Pass-Through in the Turkish Oil-Gasoline Markets," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 74-93, June.
    8. Kang, Wensheng & de Gracia, Fernando Perez & Ratti, Ronald A., 2019. "The asymmetric response of gasoline prices to oil price shocks and policy uncertainty," Energy Economics, Elsevier, vol. 77(C), pages 66-79.
    9. Sam Olofin & Afees A. Salisu, 2017. "Modelling oil price-inflation nexus: The role of asymmetries and structural breaks," Working Papers 020, Centre for Econometric and Allied Research, University of Ibadan.
    10. Sukmana, Raditya & Ibrahim, Mansor H., 2017. "How Islamic are Islamic banks? A non-linear assessment of Islamic rate – conventional rate relations," Economic Modelling, Elsevier, vol. 64(C), pages 443-448.
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