Time lags in the pass-through of crude oil prices: big data evidence from the German gasoline market

Manuel Frondel, Colin Vance and Alex Kihm

Applied Economics Letters, 2016, vol. 23, issue 10, 713-717

Abstract: This article investigates the pass-through of global Brent oil notations to fuel prices across the oligopoly of retail majors in Germany. We assemble a high-frequency panel data set that encompasses millions of price observations and allows us to distinguish effects by brand. Upon establishing a cointegrating relationship between fuel and crude oil prices using daily data, we estimate an ECM and find that (1) the pass-through of oil prices critically depends on the number of time lags included in the ECM; (2) strict adherence to classical information criteria for determining lag length yields extremely long pass-through durations and (3) the estimated impulse response functions are virtually identical across brands, irrespective of the lag count, suggesting a high degree of competition among brands.

Date: 2016
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DOI: 10.1080/13504851.2015.1102836

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