Abstract
This paper re-examines the issue of asymmetries in the transmission of shocks to crude oil prices onto the retail price of gasoline. The distinguishing features are: (i) use of updated and comparable data to carry out an international comparison of gasoline markets; (ii) two-stage modeling of the transmission mechanism, in order to assess possible asymmetries at either the refinery stage, the distribution stage or both; (iii) use of asymmetric error correction models to distinguish between short-run and long-run asymmetries; (iv) explicit, possibly asymmetric, role of the exchange rate; (v) bootstrapping of F-tests of asymmetries, in order to overcome the low-power problem of conventional testing procedures. In contrast to several previous findings, the results generally point to widespread differences in both adjustment speeds and short-run responses when input prices rise or fall.
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