ANALYZING THE ASYMMETRIC EFFECTS OF CRUDE OIL PRICE CHANGES ON CHINA’S PETROLEUM PRODUCT PRICES

Xianchun Liao and Jungho Baek
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Xianchun Liao: Business School and Institute of Green Development University of Jinan, Jinan, P. R. China

The Singapore Economic Review (SER), 2023, vol. 68, issue 05, 1751-1770

Abstract: As the world’s second-largest crude oil consumer, China depends on imports for approximately 60% and domestic production for approximately 40%, of its oil demand. Therefore, it is very interesting to assess the pass-through effects of both domestic and international crude oil prices to gasoline and diesel prices. After the short- and long-run investigations using the nonlinear autoregressive distributed lag (ARDL) methodology of Shin et al. [Shin, Y, BC Yu and M Greenwood-Nimmo (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework†Festschrift in Honor of Peter Schmidt: Econometric Methods and Applications, R Sickels and W Horrace (eds.), pp. 281–314. Springer.], we find overwhelming evidence supporting the asymmetric price transmission mechanism between crude oil prices and gasoline prices in both the short- and long-run. In the case of diesel prices, on the other hand, the asymmetry effects seem likely to be a long-run phenomenon.

Keywords: Asymmetry; China; crude oil; nonlinear ARDL (search for similar items in EconPapers)
JEL-codes: C22 Q4 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1142/S021759081950070X

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