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Nonlinear and asymmetric pricing behaviour in the Spanish gasoline market

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  • Escribano, Álvaro
  • Torrado, María

Abstract

Over the last decades a transition from a state-own monopoly to a private business took placein the Spanish fuel sector. To figure out whether downstream prices react differently toupstream price increases than to price decreases, alternative dynamic nonlinear andasymmetric error correction models are applied to weekly price data. This paper analyse theexistence of price asymmetries in the fuel market in Spain during the 2011-2016 period. Incomparison with traditional asymmetric price theory literature, this paper introduces a newdouble threshold error correction (ECM) model (DT-ECM) and new double logistic ECMmodels and compares them with more common linear ECM, time varying parameter models(TV-ECM), threshold autoregressive models (T-ECM), smooth transition autoregressive(STAR) models and nonlinear error correction (Logistic-ECM) and double threshold Logistic(DT-Logistic ECM). The nonlinear and asymmetric results found show that sophisticatedbivariate long-run asymmetries are present in the prices of the fuel sector and that those pricereactions depend on whether the oil price increases or decreases, on the stage of theproduction, the distribution chain as well as on the period considered.

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  • Escribano, Álvaro & Torrado, María, 2017. "Nonlinear and asymmetric pricing behaviour in the Spanish gasoline market," UC3M Working papers. Economics 24984, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:24984
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    Cited by:

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    2. María Torrado & Álvaro Escribano, 2020. "European gasoline markets: price transmission asymmetries in mean and variance," Applied Economics, Taylor & Francis Journals, vol. 52(42), pages 4621-4638, September.
    3. Escribano, Álvaro & Wang, Dandan, 2021. "Mixed random forest, cointegration, and forecasting gasoline prices," International Journal of Forecasting, Elsevier, vol. 37(4), pages 1442-1462.
    4. Hsiang-Hsi Liu & Pi-Hsia Hung & Po-Hung Luo Cho, 2021. "Nonlinear Interactions and Volatility Spillovers between Stock and Foreign Exchange Markets: The STVEC-STGARCH-DCC Approach," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 11(4), pages 1-3.

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    More about this item

    Keywords

    Gasoline Price Asymmetries;

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels

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