Building on the well-established “rockets and feathers” literature, and on the recently developed nonlinear autoregressive distributed lag (NARDL) modelling, we investigate the asymmetries in gasoline pricing on a comprehensive sample of monthly data from twelve Eurozone countries running from 1994:1 to 2014:12. The empirical results feature two robust patterns. Firstly, while the effects of exchange rate variations display a positive asymmetry (i.e., devaluations have a greater impact with respect to revaluations), crude price variations induce negative asymmetry (i.e., reductions in the price of crude oil have a greater impact than price rises). Secondly, the positive asymmetry to exchange rate changes is much stronger in core Eurozone countries. The negative asymmetry with respect to crude oil prices confirms the results of recent empirical research and theoretical models.
Gabriele d’Annunzio University
Christian Alexander Mongeau Ospina
Keywords: asymmetric cointegration, asymmetric price adjustment, pass-through,
gasoline price, European gasoline market, signaling.
JEL Classification: C22, D43, D82, E31, L71, Q41.