Asymmetric price adjustment in the US gasoline industry:evidence from Bayesian threshold dynamic panel data models

Polemis, Michael L. and Tsionas, Mike G. (2017) Asymmetric price adjustment in the US gasoline industry:evidence from Bayesian threshold dynamic panel data models. International Journal of the Economics of Business, 24 (1). pp. 91-128. ISSN 1357-1516

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Abstract

This paper investigates the gasoline price adjustment to changes in the input cost price for a panel of 48 US states using a monthly data set covering the period 1994?2011. We build, for the first time, a non-linear threshold panel vector-error-correction model (PVECM) and propose efficient Markov chain Monte Carlo (MCMC) Bayesian techniques. Our findings indicate that states with high margin experience a slower adjustment and a more asymmetric response to input price cost shocks. Our results are robust to potential structural breaks in the threshold parameter, which is important as market conditions change over time and are very sensitive to production/consumption constraints. Lastly, we attribute fluctuations in the gasoline prices to input cost shocks, arguing that the peak responses occurring one month after the shock are short-lived.

Item Type:
Journal Article
Journal or Publication Title:
International Journal of the Economics of Business
Additional Information:
This is an Accepted Manuscript of an article published by Taylor & Francis in International Journal of the Economics of Business on 08/10/2016, available online: http://www.tandfonline.com/10.1080/13571516.2016.1221628
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
?? ASYMMETRIC PRICE ADJUSTMENTGASOLINE INDUSTRYNON-LINEAR THRESHOLD PVECMBAYESIAN TECHNIQUES‘ROCKETS AND FEATHERS’ HYPOTHESISBUSINESS, MANAGEMENT AND ACCOUNTING (MISCELLANEOUS)ECONOMICS AND ECONOMETRICS ??
ID Code:
82964
Deposited By:
Deposited On:
20 Dec 2016 11:28
Refereed?:
Yes
Published?:
Published
Last Modified:
15 Sep 2023 04:18