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Gasoline price predictability in a border metropolitan economy

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  • Thomas M. Fullerton
  • Alan Jimenez
  • Yu Liu
  • Adam G. Walke

Abstract

This study examines the predictability of local retail gasoline prices in the El Paso metropolitan economy. Given its location on the border with Mexico, the potential influence of cross-border economic variables on gasoline prices in El Paso is taken into account. The study uses monthly frequency time series data from 2001 to 2013. Because historical consumption data are not available, the error correction econometric model employs a reduced form equation in which gasoline prices are functionally dependent on several explanatory variables. Out-of-sample price simulations are compared against random walk and random walk with drift benchmarks. Results obtained indicate that the econometric approach performs fairly well relative to both benchmarks.

Suggested Citation

  • Thomas M. Fullerton & Alan Jimenez & Yu Liu & Adam G. Walke, 2015. "Gasoline price predictability in a border metropolitan economy," Applied Economics Letters, Taylor & Francis Journals, vol. 22(6), pages 499-502, April.
    • Handle: RePEc:taf:apeclt:v:22:y:2015:i:6:p:499-502
    DOI: 10.1080/13504851.2014.952886
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    References listed on IDEAS

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    1. Banfi, Silvia & Filippini, Massimo & Hunt, Lester C., 2005. "Fuel tourism in border regions: The case of Switzerland," Energy Economics, Elsevier, vol. 27(5), pages 689-707, September.
    2. Tsuruta, Yoshitaka, 2008. "What affects intranational price dispersion?: The case of Japanese gasoline prices," Japan and the World Economy, Elsevier, vol. 20(4), pages 563-584, December.
    3. Bello, Alejandro & Contín-Pilart, Ignacio, 2012. "Taxes, cost and demand shifters as determinants in the regional gasoline price formation process: Evidence from Spain," Energy Policy, Elsevier, vol. 48(C), pages 439-448.
    4. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-144, January.
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    1. Fullerton, Thomas M. & Jiménez, Alan A. & Walke, Adam G., 2015. "An econometric analysis of retail gasoline prices in a border metropolitan economy," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 450-461.
    2. Arunanondchai, Panit & Senia, Mark C. & Capps, Oral, Jr., "undated". "Can U.S. EIA Retail Gasoline Price Forecasts Be Improved Upon?," Reports 285201, Texas A&M University, Agribusiness, Food, and Consumer Economics Research Center.

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