Asymmetric evidence of gasoline price responses in France: A Markov-switching approach

Raphaël Homayoun Boroumand, Stéphane Goutte, Simon Porcher and Thomas Porcher

Economic Modelling, 2016, vol. 52, issue PB, 467-476

Abstract: It has been documented that retail gasoline prices respond more quickly to increases in wholesale prices than they do to decreases in wholesale prices. However, there is little empirical evidence that identifies the link between the pass-through of oil prices to gasoline in different volatility regimes. Using a Markov-switching model on weekly observations of fuel prices from 1990 to 2011, we find that fuel prices respond significantly faster to increases in crude oil prices than to decreases in crude oil prices. However, when volatility is low, the transmittal of a price change from crude oil to retail fuel is higher compared to periods of high volatility. These results provide important information on the behavior of retailers. The findings of this paper therefore provide clues for better understanding the recent dynamics of fuel prices and some policy implications.

Keywords: Regime switching; Asymmetry; Gasoline (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:52:y:2016:i:pb:p:467-476

DOI: 10.1016/j.econmod.2015.09.027

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