The asymmetry of gasoline prices: fresh evidence from an error correction model for U.K. and U.S.A.

Abstract

An error correction model was fitted to monthly data on net retail gasoline prices for the U.K. and the U.S.A. over the period January 1980–June 1996 in order to examine the short-run response of gasoline prices to changes in crude oil costs and exchange rate. The hypothesis of a symmetric response by gasoline station owners to crude oil price rises and falls was rejected by the data for both the U.K. and the U.S.A. A similar hypothesis in regard to the exchange rate was also rejected by the data. © 1998 John Wiley & Sons. Ltd.