Do petrol prices rise faster than they fall when the market shows significant disequilibria?

Author(s)
Valadkhani, Abbas
Publication Date
2013
Abstract
This paper examines if the long-run relationship between retail and wholesale petrol prices is subject to adjustment asymmetric behaviour using weekly Australian data (2007-2012) across 111 locations. A short-run dynamic model is specified in which three feedback coefficients capture three different types of disequilibria: large and positive; large and negative; small positive/negative. Significant evidence of asymmetric behaviour is found in 28 locations, which are mainly in Tasmania, Queensland and New South Wales. In these locations when prices are conspicuously above the equilibrium path, retailers sluggishly lower their prices but when prices are substantially below the equilibrium values, the adjustment speed is significantly faster.
Citation
Energy Economics, v.39, p. 66-80
ISSN
1873-6181
0140-9883
Link
Publisher
Elsevier BV
Title
Do petrol prices rise faster than they fall when the market shows significant disequilibria?
Type of document
Journal Article
Entity Type
Publication

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