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Did the global financial crisis alter the oil–gasoline price relationship?

Author

Listed:
  • Jonathan E. Ogbuabor

    (University of Nigeria, Nsukka
    University of York)

  • Anthony Orji

    (University of Nigeria, Nsukka)

  • Gladys C. Aneke

    (University of Nigeria, Nsukka)

  • Manasseh O. Charles

    (University of Nigeria, Nsukka)

Abstract

This paper investigated the oil–gasoline price relationship in the UK and USA following the 2007–2008 global financial crisis. The dummy variable approach to testing for structural break and the nonlinear autoregressive distributed lag approach for modeling asymmetry cointegrating relationships were used. The findings indicate that the crisis induced significant structural break in this relationship in both countries. For the UK, we find strong evidence of rockets and feathers effect plus the possibility of firms using the tax system to hide rent-seeking behavior before and after the crisis, which means that the results of Greenwood-Nimmo and Shin (Econ Lett 121:411–416, 2013) are no longer plausible. For the USA, we find significant evidence of the rockets and feathers effect in the post-crisis period when the data are restricted to March 2013; however, this effect disappears once the data are extended to June 2017. These findings suggest that continuous monitoring and other antitrust and consumer welfare policies are required in these economies to preserve competition and the overall social welfare.

Suggested Citation

  • Jonathan E. Ogbuabor & Anthony Orji & Gladys C. Aneke & Manasseh O. Charles, 2019. "Did the global financial crisis alter the oil–gasoline price relationship?," Empirical Economics, Springer, vol. 57(4), pages 1171-1200, October.
  • Handle: RePEc:spr:empeco:v:57:y:2019:i:4:d:10.1007_s00181-018-1490-z
    DOI: 10.1007/s00181-018-1490-z
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    References listed on IDEAS

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    Cited by:

    1. Zacharias Bragoudakis & Dimitrios Sideris, 2019. "Asymmetric price adjustment and the effects of structural reforms in a low income environment: the case of the gasoline market in Greece," Working Papers 274, Bank of Greece.

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    More about this item

    Keywords

    Rockets and feathers effect; Nonlinear ARDL model; Global financial crisis; Antitrust policy;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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