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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.

Suggested Citation

  • 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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    References listed on IDEAS

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