Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/318850 
Year of Publication: 
2024
Citation: 
[Journal:] Business Systems Research (BSR) [ISSN:] 1847-9375 [Volume:] 15 [Issue:] 2 [Year:] 2024 [Pages:] 154-176
Publisher: 
Sciendo, Warsaw
Abstract: 
Background According to many studies, the transmission of oil prices to retail fuel prices is asymmetric. Fuel prices react faster if oil prices rise and more slowly if oil prices fall. Different standard econometric procedures lead to different results. The Linex approach, which is based on formulating the non-linear adjustment cost function, reflects the theory. It uses the generalised method of moments to estimate the reaction functions, which demands many observations. Objectives The paper investigates the price asymmetry in the Croatian retail fuel market using standard approaches and the Linex approach. Methods/Approach The simple and dynamic asymmetry models, error correction models, threshold autoregressive co-integration, and the Linex approach are used to verify the hypothesis of asymmetric reactions of gasoline and diesel prices in Croatia. Results The results using the standard methods are mixed, while the Linex approach indicates price asymmetry, the size of which is measured with the average price bias. The results correspond to other studies worldwide. Conclusions The authors' preferred Linex approach detects price asymmetries, even with large data samples with frequent changes in trends and volatilities. According to the approach, the question is not whether prices are formed asymmetrically but the size of the asymmetry.
Subjects: 
retail prices
error correction model
threshold autoregressive cointegration
linear-exponential adjustment cost function
generalised method of moments
JEL: 
C26
C51
Q41
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.