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Structural shocks and dinamic elasticities in a long memory model of the US gasoline retail market

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  • Lovcha, Yuliya
  • Pérez Laborda, Àlex

Abstract

A structural multivariate long memory model of the US gasoline market is employed to disentangle structural shocks and to estimate the own-price elasticity of gasoline demand. Our main empirical findings are: 1) there is strong evidence of nonstationarity and mean-reversion in the real price of gasoline and in gasoline consumption; 2) accounting for the degree of persistence present in the data is essential to assess the responses of these two variables to structural shocks; 3) the contributions of the different supply and demand shocks to fluctuations in the gasoline market vary across frequency ranges; and 4) long memory makes available an interesting range of convergent possibilities for gasoline demand elasticities. Our estimates suggest that after a change in prices, consumers undertake a few measures to reduce consumption in the short- and medium-run but are reluctant to implement major changes in their consumption habits. Keywords: fractional integration, gasoline demand, price elasticity, structural model Classification: Q41, Q43, C32

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  • Lovcha, Yuliya & Pérez Laborda, Àlex, 2016. "Structural shocks and dinamic elasticities in a long memory model of the US gasoline retail market," Working Papers 2072/261538, Universitat Rovira i Virgili, Department of Economics.
  • Handle: RePEc:urv:wpaper:2072/261538
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    Keywords

    Gasolina; Oferta i demanda; Sèries temporals -- Anàlisi; 33 - Economia;

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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