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Do daily retail gasoline prices adjust asymmetrically?

Author

Listed:
  • Bettendorf, Leon
  • Geest, Stephanie van der
  • Kuper, Gerard

    (Groningen University)

Abstract

This paper analyzes adjustments in the Dutch retail gasoline prices. We estimate an error correction model on changes in the daily retail price for gasoline (taxes excluded) for the period 1996-2004 taking care of volatility clustering by estimating an EGARCH model. It turns out the volatility process is asymmetrical: an unexpected increase in the producer price has a larger effect on the variance of the producer price than an unexpected decrease. We do not find evidence for amount asymmetry, either for the long run or for the short run. However, there is a faster reaction to upward changes in spot prices than to downward changes in spot prices. This implies timing or pattern asymmetry. This asymmetry starts three days after the change in the spot price and lasts for four days.

Suggested Citation

  • Bettendorf, Leon & Geest, Stephanie van der & Kuper, Gerard, 2005. "Do daily retail gasoline prices adjust asymmetrically?," CCSO Working Papers 200503, University of Groningen, CCSO Centre for Economic Research.
    • Handle: RePEc:gro:rugccs:200503
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    Cited by:

    1. Steen, Frode & Foros, Øystein, 2008. "Gasoline prices jump up on Mondays: An outcome of aggressive competition?," CEPR Discussion Papers 6783, C.E.P.R. Discussion Papers.
    2. Aggarwal, Raj & Akhigbe, Aigbe & Mohanty, Sunil K., 2012. "Oil price shocks and transportation firm asset prices," Energy Economics, Elsevier, vol. 34(5), pages 1370-1379.
    3. Sunil Mohanty & Aigbe Akhigbe & Tawfeek Al-Khyal & Turki Bugshan, 2013. "Oil and stock market activity when prices go up and down: the case of the oil and gas industry," Review of Quantitative Finance and Accounting, Springer, vol. 41(2), pages 253-272, August.
    4. 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.
    5. 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.
    6. Perdiguero-García, Jordi, 2013. "Symmetric or asymmetric oil prices? A meta-analysis approach," Energy Policy, Elsevier, vol. 57(C), pages 389-397.
    7. Jordi Perdiguero-García, 2010. "“Symmetric or asymmetric gasoline prices? A metaanalysis approach”," IREA Working Papers 201013, University of Barcelona, Research Institute of Applied Economics, revised Nov 2010.
    8. Farajzadeh, Z. & Amiraslany, A., 2018. "Examination of the international market power for Iranian pistachios," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277345, International Association of Agricultural Economists.
    9. Balaguer, Jacint & Ripollés, Jordi, 2012. "Testing for price response asymmetries in the Spanish fuel market. New evidence from daily data," Energy Economics, Elsevier, vol. 34(6), pages 2066-2071.
    10. Riemer P. Faber, 2015. "More New Evidence on Asymmetric Gasoline Price Responses," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    11. Abbas Valadkhani & Sajid Anwar & Amir Arjomandi, 2014. "Downward stickiness of interest rates in the Australian credit card market," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 19(1), pages 52-65, January.
    12. Balaguer, Jacint & Ripollés, Jordi, 2016. "Asymmetric fuel price responses under heterogeneity," Energy Economics, Elsevier, vol. 54(C), pages 281-290.
    13. Riemer P. Faber, 2009. "Asymmetric Price Responses of Gasoline Stations: Evidence for Heterogeneity of Retailers," Tinbergen Institute Discussion Papers 09-106/1, Tinbergen Institute.
    14. Escribano Alvaro & Torrado María, 2018. "Nonlinear and asymmetric pricing behaviour in the Spanish gasoline market," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 22(5), pages 1-19, December.
    15. Abbas Valadkhani & Sajid Anwar & Amir Arjonandi, 2012. "How to capture the full extent of price stickiness in credit card interest rates?," Economics Working Papers wp12-02, School of Economics, University of Wollongong, NSW, Australia.
    16. Jacint Balaguer & Jordi Ripollés, 2016. "Exploring the life of price responses in fuel markets. Mean group data or mean group estimator?," Working Papers 2016/16, Economics Department, Universitat Jaume I, Castellón (Spain).
    17. Abbas Valadkhani & Sajid Anwar, 2012. "Interest Rate Pass-Through and the Asymmetric Relationship between the Cash Rate and the Mortgage Rate," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 341-350, September.
    18. Sarker, Rakhal & Oyewumi, Olubukola Ayodeji, 2015. "Trade Policy Change And Price Volatility Spill-Over In A Customs Union: A Case Study Of Lamb Trade Between Namibia And South Africa," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 3(01), pages 1-14, January.
    19. Leo Haan & Elmer Sterken, 2011. "Bank-Specific Daily Interest Rate Adjustment in the Dutch Mortgage Market," Journal of Financial Services Research, Springer;Western Finance Association, vol. 39(3), pages 145-159, June.
    20. Tuan Van Nguyen, 2013. "The stable relationship between crude oil price and petrol price: Evidence from multivariate GARCH model," The Empirical Econometrics and Quantitative Economics Letters, Faculty of Economics, Chiang Mai University, vol. 2(2), pages 27-40., June.
    21. Kaukin, A. & Filicheva, E. & Freinkman, L., 2016. "Determinants of Russian Retail Petroleum Prices," Journal of the New Economic Association, New Economic Association, vol. 30(2), pages 34-59.
    22. Bremmer, Dale S. & Kesselring, Randall G., 2016. "The relationship between U.S. retail gasoline and crude oil prices during the Great Recession: “Rockets and feathers” or “balloons and rocks” behavior?," Energy Economics, Elsevier, vol. 55(C), pages 200-210.
    23. Abbas Valadkhani & Martin O'Brien & Amir Arjomandi, 2013. "Examining the nature of the relationship between Tapis crude oil and Singapore petrol prices," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 36(1), pages 27-41.
    24. Julie Bennett & Michael T. Owyang & E. Katarina Vermann, 2021. "Regional Gasoline Price Dynamics," Review, Federal Reserve Bank of St. Louis, vol. 103(3), pages 289-314, July.

    More about this item

    JEL classification:

    • 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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