TY - JOUR
T1 - Estimating retail gasoline price dynamics
T2 - The effects of sample characteristics and research design
AU - Deltas, George
AU - Polemis, Michael
N1 - Funding Information:
The paper has greatly benefited from suggestions by two anonymous referees. We would like to thank David Peel, Stefano Soccorsi, and seminar participants in the Lancaster Conference on Macroeconomic and Financial Time Series Analysis for helpful comments. We would also like to thank Michael Fotiadis for providing us with the Rotterdam upstream price data. We alone are responsible for any errors from their use.
Publisher Copyright:
© 2020 Elsevier B.V.
PY - 2020/10
Y1 - 2020/10
N2 - The study shows that much of the variation in the findings of the literature on retail gasoline price dynamics is systematic rather than sample variation from using different data. Estimates of pass-through rates depend systematically on research design and features of the data, such as the sampling frequency, the choice of upstream price, whether taxes are included or not, the sample length, and the postulated lag structure. In addition, there are systematic differences between time periods and countries. Using a 20 year-long dataset of 28 European Union countries we quantify the extent of estimate variation that arises from the choice of data structure, from temporal and country heterogeneity, and from sampling variation. Our findings inform the interpretation of results on pass-through rates derived from Error Correction Models. They are also of relevance for the broader literature estimating the transmission of price shocks in the economy.
AB - The study shows that much of the variation in the findings of the literature on retail gasoline price dynamics is systematic rather than sample variation from using different data. Estimates of pass-through rates depend systematically on research design and features of the data, such as the sampling frequency, the choice of upstream price, whether taxes are included or not, the sample length, and the postulated lag structure. In addition, there are systematic differences between time periods and countries. Using a 20 year-long dataset of 28 European Union countries we quantify the extent of estimate variation that arises from the choice of data structure, from temporal and country heterogeneity, and from sampling variation. Our findings inform the interpretation of results on pass-through rates derived from Error Correction Models. They are also of relevance for the broader literature estimating the transmission of price shocks in the economy.
KW - Cost pass-through
KW - Error correction model
KW - Price adjustment and inflation
KW - Rockets and feathers
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U2 - 10.1016/j.eneco.2020.104976
DO - 10.1016/j.eneco.2020.104976
M3 - Article
AN - SCOPUS:85095712105
SN - 0140-9883
VL - 92
JO - Energy Economics
JF - Energy Economics
M1 - 104976
ER -