Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/267577 
Year of Publication: 
2020
Citation: 
[Journal:] Baltic Journal of Economics [ISSN:] 2334-4385 [Volume:] 20 [Issue:] 1 [Publisher:] Taylor & Francis [Place:] London [Year:] 2020 [Pages:] 59-73
Publisher: 
Taylor & Francis, London
Abstract: 
The purpose of the paper is to test the hypothesis about asymmetric price transmission between the fuel markets. The distribution chain is considered at three levels: the European wholesale market, the domestic wholesale market, and the domestic retail market. It is shown that between the European and domestic wholesale markets fuel prices adjust symmetrically and asymmetrically between the domestic wholesale market and the retail market. This finding confirms that the most probable cause of asymmetric price adjustments (especially in new EU member states) is the behaviour of petrol stations and not of oil companies. The empirical analysis is conducted using an appropriately modified Hansen-Seo method. The procedure, which has until recently been used to estimate bivariate threshold models, prevents the presence of the constant in the cointegrating vector entailing the risk of severe distortion of the estimation results. Moreover, the interpretation of a dummy variable present in the CVAR equation as a result of a data generating process distortion is limited by its presence in the cointegration space.
Subjects: 
Threshold cointegration
threshold cointegrated VAR
modified Hansen-Seo method
fuel pricing
asymmetric price adjustments
JEL: 
C10
C32
D40
Q40
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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