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Asymmetric exchange rate and oil price pass-through in motor fuel market: A microeconometric approach

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  • Utku Özmen, Mustafa
  • Akçelik, Fatih

Abstract

We analyze the response of retail motor fuel prices to oil price and exchange rate changes. Using a novel microdata approach considering price spells separately; we find evidence for pass-through asymmetry in Turkish motor fuel market based on the sign, source and size of cost shocks. Exchange rate (oil price) is the main factor fueling asymmetry in case of cost increases (decreases). The smaller the magnitude of positive cost shock the higher the pass-through is. Sign asymmetry is reversed during crisis. Market structure is suggested as the main explanation of the asymmetry, yet there are factors limiting the use of market power.

Suggested Citation

  • Utku Özmen, Mustafa & Akçelik, Fatih, 2017. "Asymmetric exchange rate and oil price pass-through in motor fuel market: A microeconometric approach," The Journal of Economic Asymmetries, Elsevier, vol. 15(C), pages 64-75.
  • Handle: RePEc:eee:joecas:v:15:y:2017:i:c:p:64-75
    DOI: 10.1016/j.jeca.2017.02.002
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    More about this item

    Keywords

    Oil price; Exchange rate; Micro data; Motor fuel; Pass-through asymmetry; Turkey;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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