Evidence about asymmetric price transmission in the main European fuel markets: from TAR-ECM to Markov-switching approach
José María Martín-Moreno (),
Rafaela Perez () and
Jesús Ruiz ()
Additional contact information
José María Martín-Moreno: Universidad de Vigo
Jesús Ruiz: Universidad Complutense de Madrid and ICAE
Empirical Economics, 2019, vol. 56, issue 4, 1383-1412
Abstract This paper presents new evidence on the existence of asymmetries in the transmission of shocks in oil prices in the main European fuel markets and their relation to the so-called rockets and feathers effect. Our approach differs from the existing literature in two ways: (1) the data used: we use forward prices rather than spot prices because fuel leaders use forward contracts to buy crude oil. (2) The methodological approach is different. We adopt a more sophisticated econometric model, the Markov-switching model, and use it to contrast the robustness of the results obtained with the TAR-ECM methodology with an endogenous threshold (nonzero threshold). In general, the results show evidence of an asymmetric response of gasoline and diesel prices to changes in the price of crude oil, both in the short-run and with respect to the adjustment towards long-run equilibrium. These price asymmetries fall in line with the “rockets and feathers” hypothesis.
Keywords: Price asymmetries; Crude oil prices; TAR-ECM; Markov-switching estimation; “Rockets and feathers” behaviour (search for similar items in EconPapers)
JEL-codes: C01 C51 D43 Q40 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s00181-017-1388-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:empeco:v:56:y:2019:i:4:d:10.1007_s00181-017-1388-1
Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2
Access Statistics for this article
Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund
More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla ().