Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108613
Authors: 
Holmes, Mark J.
Otero, Jesús
Panagiotidis, Theodore
Year of Publication: 
2012
Series/Report no.: 
Koç University-TÜSİAD Economic Research Forum Working Paper Series 1230
Abstract: 
This paper employs a pair-wise approach to examine regional integration in the US gasoline market. Using gasoline price data at the state level over a period of more than two decades, we find strong support for the view that the law of one price holds in regional markets, as more than 80% of bivariate price differentials turn out to be stationary. Furthermore, we uncover evidence that the speed at which prices converge to the long-run equilibrium depends upon the distance between states. Asymmetries are also present in this relationship. Our findings suggest that the more similar are states with respect to taxation, gas stations and refining capacity, the faster is the speed of adjustment towards the long-run equilibrium.
Subjects: 
Panel data
pair-wise approach
market integration
gasoline
speed of adjustment
JEL: 
C33
Q47
R11
Document Type: 
Working Paper

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