Rights statement: This is an Accepted Manuscript of an article published by Taylor & Francis in International Journal of the Economics of Business on 08/10/2016, available online: http://www.tandfonline.com/10.1080/13571516.2016.1221628
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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Asymmetric price adjustment in the US gasoline industry
T2 - evidence from Bayesian threshold dynamic panel data models
AU - Polemis, Michael L.
AU - Tsionas, Mike G.
N1 - This is an Accepted Manuscript of an article published by Taylor & Francis in International Journal of the Economics of Business on 08/10/2016, available online: http://www.tandfonline.com/10.1080/13571516.2016.1221628
PY - 2017/1
Y1 - 2017/1
N2 - This paper investigates the gasoline price adjustment to changes in the input cost price for a panel of 48 US states using a monthly data set covering the period 1994?2011. We build, for the first time, a non-linear threshold panel vector-error-correction model (PVECM) and propose efficient Markov chain Monte Carlo (MCMC) Bayesian techniques. Our findings indicate that states with high margin experience a slower adjustment and a more asymmetric response to input price cost shocks. Our results are robust to potential structural breaks in the threshold parameter, which is important as market conditions change over time and are very sensitive to production/consumption constraints. Lastly, we attribute fluctuations in the gasoline prices to input cost shocks, arguing that the peak responses occurring one month after the shock are short-lived.
AB - This paper investigates the gasoline price adjustment to changes in the input cost price for a panel of 48 US states using a monthly data set covering the period 1994?2011. We build, for the first time, a non-linear threshold panel vector-error-correction model (PVECM) and propose efficient Markov chain Monte Carlo (MCMC) Bayesian techniques. Our findings indicate that states with high margin experience a slower adjustment and a more asymmetric response to input price cost shocks. Our results are robust to potential structural breaks in the threshold parameter, which is important as market conditions change over time and are very sensitive to production/consumption constraints. Lastly, we attribute fluctuations in the gasoline prices to input cost shocks, arguing that the peak responses occurring one month after the shock are short-lived.
KW - Asymmetric Price Adjustment
KW - Gasoline Industry
KW - Non-linear Threshold PVECM
KW - Bayesian Techniques
KW - ‘Rockets and feathers’ Hypothesis
U2 - 10.1080/13571516.2016.1221628
DO - 10.1080/13571516.2016.1221628
M3 - Journal article
VL - 24
SP - 91
EP - 128
JO - International Journal of the Economics of Business
JF - International Journal of the Economics of Business
SN - 1357-1516
IS - 1
ER -