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Empirical Economics
Erschienen in: Empirical Economics 3/2019

20.12.2017

Asymmetric price transmission in the US and German fuel markets: a quantile autoregression approach

verfasst von: Karsten Schweikert

Erschienen in: Empirical Economics | Ausgabe 3/2019

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Abstract

This paper proposes a new econometric model for asymmetric price transmissions. We estimate long-run equilibrium equations between upstream and downstream prices and use quantile autoregression to estimate a quantile-dependent adjustment behaviour for lower and upper quantiles of the residual process. We develop a bootstrap cointegration test which is suitable for cointegration relationships that exhibit quantile-dependent adjustment. Furthermore, we introduce the appropriate statistical tests for across-quantile comparisons and overall quantile effects. The methodology is applied to the US and German gasoline and diesel markets. Our empirical results suggest that asymmetries can be found in the early stages of the production chain, but are not completely transferred to retail prices.
Vorheriger Artikel Output gaps, inflation and financial cycles in the UK
Nächster Artikel Assessing the role of futures position substitutability in a monthly model of factor demand for softwood lumber

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Fußnoten
1
Compare, for example, the results in Al-Gudhea et al. (2007) and Douglas (2010).
 
2
Honarvar (2010) shows in a series of simulation experiments how an incorrect threshold biases the estimated coefficients.
 
3
The share of diesel cars sales rose to an all-time high with 2.94% in 2009, but then dropped back down to 0.33% in 2012 (US Department of Energy 2013).
 
4
The mineral tax in Germany has changed five times during our sample. At the beginning of our sample in 1999 the mineral tax for gasoline (diesel) was 50.11 (31.70) cents. It increased by 3.07 cents in April 1999 and then in January of each following year to reach 65.45 (47.04) cents in 2003. The VAT increased in 2007 from 16 to 19%.
 
5
The disequilibrium series, although estimated, will be denoted \(z_t\) for simplicity.
 
6
Note that the quantile autoregression should not be estimated in the usual mean-reversion notation since the application of the nonparametric quantile function on the response \(\Delta z_t\) is not equivalent to the application on the response \(z_t\). The former could be used to model momentum shifts in the adjustment process.
 
7
We intend to retain the dependence structure of the data by choosing a replication with an average block length of \(l = 2\,m\), where m is the most distant lag that still shows a significant impact in the autocovariance function of \(z_t\) (see Politis and Romano 1994). We use 600 replications of the disequilibrium series \(z_t\) to estimate the covariance matrix.
 
8
The interpretation of the quantile approach, unfortunately, suffers from subjective decision-making in that we have to determine which across-quantile comparisons are most relevant. For the empirical part, we therefore display a battery of Wald tests as well as plots of the estimates of \(\rho _t\) to depict the adjustment behaviour as accurately as possible.
 
9
Using the symmetry of the standard-normal distribution, we can easily generate data so that positive shocks are reverted and large negative shocks persist. The autoregressive coefficient \(\rho _t\) then follows the function \(\theta (\vartheta _t) = \text {min}\left\{ c + F(-\vartheta _t), 1\right\} \). However, the results are virtually identical.
 
10
The properties of different crude oil benchmarks have been discussed in the literature (see Fattouh (2006) for an extensive exposition). WTI and Brent have been chosen since they are the crude oils primarily utilized in US and European refineries, respectively. However, switching the benchmarks or using a third benchmark (Dubai) instead, did not change the qualitative interpretation of our results.
 
11
Estimated breakpoints become irrelevant if the null hypothesis of the BH test is rejected.
 
12
The unit root test results for log-transformed prices lead to the same test decision, but are not reported here to conserve space.
 
13
Estimating the cointegration regressions in a linear specification yields qualitatively identical results for the asymmetry patterns.
 
14
Likewise, a log-specification does not alter the results substantially.
 
15
The results for Los Angeles and New York Habor prices display a similar pattern.
 
16
The cointegration tests are performed without controlling for structural breaks in the intercept since the modified QKS test in Sect. 3.1 does not account for structural shifts in the long-run equilibrium relationship. However, since the timing of the breaks is known beforehand and the adjustment rates increase after inclusion of the dummy variables, we can interpret the p values in Table 3 as upper bounds.
 
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Metadaten
Titel
Asymmetric price transmission in the US and German fuel markets: a quantile autoregression approach
verfasst von
Karsten Schweikert
Publikationsdatum
20.12.2017
Verlag
Springer Berlin Heidelberg
Erschienen in
Empirical Economics / Ausgabe 3/2019
Print ISSN: 0377-7332
Elektronische ISSN: 1435-8921
DOI
https://doi.org/10.1007/s00181-017-1376-5

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