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New evidence on the relationship beetween crude oil and petroleum product prices

  • Mario Denni
  • G. Frewer

The present study aims at providing new evidence on the price re- lationships between crude oil and petroleum products. We employ single-equation error correction models (ECM) in which both changes in crude oil price and deviations from the long-run equilibrium are used to explain product price dynamics. A GARCH structure is applied to models' residuals to account for the time-varying volatility. Our key piece of innovation is the introduction of re¯ning margin e®ects to the analysis of the asymmetric products price movements. Results suggest that the overall balance in the re¯nery sector plays an important part in the adjustment to crude price shocks.

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Paper provided by Department of Economics - University Roma Tre in its series Departmental Working Papers of Economics - University 'Roma Tre' with number 0061.

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Length: 48
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:rtr:wpaper:0061
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  23. A. Lanza & M. Manera & M. Giovannini, 2003. "Oil and price dynamics in international petroleum markets," Working Paper CRENoS 200306, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  24. Steven Cook, 1999. "Nonsymmetric error correction revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 6(7), pages 467-470.
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