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Asymmetric Error Correction Models For The Oil-Gasoline Price Relationship, Margherita Grasso, Matteo Manera
Asymmetric Error Correction Models For The Oil-Gasoline Price Relationship, Margherita Grasso, Matteo Manera
Matteo Manera
The existing literature on price asymmetries does not systematically investigate the sensitivity of the empirical results to the choice of a particular econometric specification. This paper fills this gap by providing a detailed comparison of the three most popular models designed to describe asymmetric price behaviour, namely asymmetric ECM, autoregressive threshold ECM and ECM with threshold cointegration. Each model is estimated on a common monthly dataset for the gasoline markets of France, Germany, Italy, Spain and UK over the period 1985-2003. All models are able to capture the temporal delay in the reaction of retail prices to changes in spot …