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Modelling U.S. gasoline demand: A structural time series analysis with asymmetric price responses

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  • Dilaver, Zafer
  • Hunt, Lester C.

Abstract

This research aims to estimate a gasoline demand function for the U.S. using a stochastic exogenous trend model with asymmetric price responses. It is, as far as is known, the first attempt to model U.S. gasoline demand using this combined approach. The Structural Time Series Model is therefore employed for annual data over the period 1949–2019 allowing for both asymmetric price responses (for technical progress to affect demand endogenously) and an underlying energy demand trend for gasoline (for technical progress and other factors to affect demand exogenously in a linear or non-linear way). It is found that for U.S. per capita gasoline demand, the estimated long-run income elasticity is 0.41, the estimated long-run price-max elasticity is −0.31, the estimated long-run price-recovery elasticity is −0.15, and the estimated long-run price-cut elasticity is −0.14. In addition, the estimated underlying energy demand trend for U.S. per capita gasoline demand is non-linear with periods when it is increasing and periods when it is decreasing.

Suggested Citation

  • Dilaver, Zafer & Hunt, Lester C., 2021. "Modelling U.S. gasoline demand: A structural time series analysis with asymmetric price responses," Energy Policy, Elsevier, vol. 156(C).
  • Handle: RePEc:eee:enepol:v:156:y:2021:i:c:s0301421521002561
    DOI: 10.1016/j.enpol.2021.112386
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    More about this item

    Keywords

    U.S. gasoline demand; Asymmetric price responses; Underlying energy demand trend (UEDT); Structural time series model; Price and income elasticities;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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