Asymmetric evidence of gasoline price responses in France: A Markov-switching approach |
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| Institution: | 1. Department of Applied Economics, Paris School of Business PSB, 59 rue Nationale, Paris 75013, France;2. Université Paris 8 (LED), 2 rue de la Liberté, 93526 Saint-Denis Cedex, France;3. Sorbonne Business School, 13 rue Watt, 75013 Paris, France;1. Kent State University, Department of Economics, USA;2. Western Sydney University, School of Business, Australia;3. University of TAS, Tasmanian School of Business and Economics, Australia;4. CAMA, Australian National University, Australia;1. Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS, France, Château La Farge, Route des Milles, 13290 Aix-en-Provence, France;2. ESG Management School, Paris, France |
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| Abstract: | It has been documented that retail gasoline prices respond more quickly to increases in wholesale prices than they do to decreases in wholesale prices. However, there is little empirical evidence that identifies the link between the pass-through of oil prices to gasoline in different volatility regimes. Using a Markov-switching model on weekly observations of fuel prices from 1990 to 2011, we find that fuel prices respond significantly faster to increases in crude oil prices than to decreases in crude oil prices. However, when volatility is low, the transmittal of a price change from crude oil to retail fuel is higher compared to periods of high volatility. These results provide important information on the behavior of retailers. The findings of this paper therefore provide clues for better understanding the recent dynamics of fuel prices and some policy implications. |
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