Time Series Analysis of Transatlantic Market Interactions: Evidence from Crude Oil and Gasoline Prices

Takamitsu Kurita
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Takamitsu Kurita: Faculty of Economics, Fukuoka University, Japan

International Journal of Business and Economics, 2010, vol. 9, issue 2, 157-173

Abstract: This paper investigates the interactions of spot markets for crude oil and regular gasoline in a transatlantic context. A cointegrated vector autoregressive (VAR) system is estimated using weekly time series data for spot prices of representative crude oil and regular gasoline in Europe and the US. The cointegrated VAR analysis shows that the US crude oil plays the role of long-run price leadership, influencing the price determination of the other commodities in the VAR system. Cointegrating vectors are then normalized and restricted so that the underlying long-run market interactions may be interpreted in terms of causal chains. Finally, a parsimonious equilibrium correction system is estimated in order to reveal the short-run market interactions.

Keywords: market interaction; long-run price leadership; crude oil; regular gasoline; cointegrated vector autoregressive model (search for similar items in EconPapers)
JEL-codes: C32 Q49 R19 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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