Asymmetric and nonlinear pass-through of crude oil prices to gasoline and natural gas prices

Abstract

International audienceIn this article,we use the recently developed nonlinear autoregressive distributedlags (NARDL) model to examine the pass-through of crude oil prices into gasoline and natural gas prices. Our approach allowsus to simultaneously test the short-and long-run nonlinearities through positive and negative partial sum decompositions of the predetermined explanatory variables. It also offers the possibility to quantify the respective responses of gasoline and natural gas prices to positive and negative oil price shocks from the asymmetric dynamic multipliers. The obtained results indicate that oil prices affect gasoline prices and natural gas prices in an asymmetric and nonlinear manner, but the price transmission mechanism is not the same. Important policy implications can be learned from the empirical findings

Asymmetric impact of crude price on oil product pricing in the United States: An application of multiple threshold nonlinear autoregressive distributed lag model

“…However, empirical evidence of Berument et al (2014) from a set of North Mediterranean nations and Karagiannis et al (2015) from four European Union nations do not support the asymmetric pass-through of the crude oil price on petroleum product prices. Nevertheless, the majority of studies in this domain (for a detailed review, refer to Perdiguero-Garcia, 2013) focus on linear relations between the prices of crude oil and gasoline, though, exceptions can be significantly noted from the recent empirical investigations of Lamotte et al (2013) and Atil et al (2014) that have explored the nonlinearity between the prices of crude oil and gasoline.…”

“…However, in this paper, we selectively explore the nonlinear pass-through of crude oil price to petroleum derivative prices in the U.S. market. We build upon our study on the recent contribution of Lamotte et al (2013), Atil et al (2014), and Shin et al (2011Shin et al ( , 2014 that have employed nonlinear autoregressive distributed lag (NARDL) model. They adopted the single-threshold method where exogenous variable is decomposed into its positive and negative components, and accordingly, the threshold for changes in the exogenous variable is set at zero.…”

Investor emotional biases and trading volume’s asymmetric response: A non-linear ARDL approach tested in S&P500 stock market

“…This procedure was previously used in Ibrahim (2015) and Atil, Lahiani, and Nguyen (2014) among others. The maximum lag order considered is 4.…”

Oil Price Pass-Through into Core Inflation

“…However, while there is clear evidence that the pass-through from oil prices to energy prices is relatively fast and complete (Burdette and Zyren, 2003;Meyler, 2009), though it is still to be determined whether it is symmetric or not (Venditti, 2013;Atil et al, 2014;Chesnes, 2016), it is unclear to what degree changes in oil prices pass-through into non-energy prices (Kilian and Lewis, 2011;Kilian, 2014).…”