Estimating Asymmetric Fuel Price Responses in Croatia

Abstract

According to many studies, the transmission of oil prices to retail fuel prices is asymmetric. Fuel prices react faster if oil prices rise and more slowly if oil prices fall. Different standard econometric procedures lead to different results. The Linex approach, which is based on formulating the non-linear adjustment cost function, reflects the theory. It uses the generalised method of moments to estimate the reaction functions, which demands many observations.

Keywords

• retail prices
• error correction model
• threshold autoregressive cointegration
• linear-exponential adjustment cost function
• generalised method of moments
• c26
• c51
• q41