Oil prices, exchange rate, and the price asymmetry in the Taiwanese retail gasoline market

Kuo-Wei Chou and Yi-Heng Tseng

Economic Modelling, 2016, vol. 52, issue PB, 733-741

Abstract: This study used the asymmetric autoregressive distributed lag model to evaluate the influence of oil price and exchange rate fluctuations on retail gasoline prices in Taiwan. Unlike the numerous previous studies, we considered the unit root tests with a structural break and suggested that all price variables were stationary series. We also showed that the adjustments of retail gasoline price follow a politico-economic asymmetry. Moreover, gasoline price responses to exchange-rate shocks were slow and complex and exhibited reverse adjustments during periods of initial exchange-rate depreciation. This is potentially because domestic petroleum companies must purchase foreign currency before purchasing crude oil.

Keywords: Oil prices; Exchange rates; Retail gasoline prices; Asymmetric autoregressive distributed lag model; Politico-economic asymmetry (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:52:y:2016:i:pb:p:733-741

DOI: 10.1016/j.econmod.2015.10.012

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