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

Pal, Debdatta; Mitra, Subrata Kumar

doi:10.1016/j.econmod.2015.08.026

Cited by 69 publications

(37 citation statements)

References 39 publications

(56 reference statements)

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“…This is derived by Crouching Error Correction Model, which is able to identify asymmetries in the cointegrating vectors by cumulative positive and negative changes. This kind of asymmetry also complies with Pal and Mitra [23], who used multiple threshold Nonlinear Autoregressive Distributed Lag Models. We consider that threshold methodology is the appropriate one, due to the fact that uncovers potential non symmetrical conditions for price changes.…”

Section: Asymmetric Price Transmissionsupporting

confidence: 83%

“…They also add that negative oil shocks have larger impact than positive ones. Pal and Mitra [23] use a multiple threshold nonlinear autoregressive distributed lag model to study potential asymmetries between oil and its derivatives. They find that there are differences, whether of direction or magnitude, to the oil derivatives' price, due to crude oil price changes.…”

Section: Introductionmentioning

confidence: 99%

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Price and Volatility Spillovers Between the US Crude Oil and Natural Gas Wholesale Markets

Perifanis

Dagoumas

2018

Energies

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The paper examines both the time-varying price and volatility transmission between US natural gas and crude oil wholesale markets, over the period 1990–2017. Short iterations suggest that neither commodity determines other’s returns, but sub-periods with very short-lived causal relationships exist. It can be asserted that the markets are decoupled, where unconventional production further enhances the already established commodities’ independence. Using Momentum Threshold Autoregressive (MTAR) cointegration methodology, we find evidence of positive asymmetry from crude oil to natural gas prices, i.e., oil price increases cause faster adjustments to natural gas prices than decreases. We also find that an 1% change of oil price has positive and significantly larger long-term impact (between 0.01% to 0.02%) to the gas price, compared to the negligible impact of gas to oil. Volatility transmission is examined using the Dynamic Conditional Covariance (DCC)-Generalized Autoregressive Conditional Heteroscedasticity (GARCH) methodology, presenting their time-varying correlation. Results show that both commodities influence each other’s volatility at the aggregate level. Finally, we conclude that both regional commodity markets are liquid and integrated, where the market fundamentals drive their price formulation. However, although markets are decoupled and not appropriate for perfect hedging of each other, the existence of bidirectional volatility transmission and their substitutability might be useful for diversified portfolio allocation.

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Section: Asymmetric Price Transmissionsupporting

confidence: 83%

Section: Introductionmentioning

confidence: 99%

Price and Volatility Spillovers Between the US Crude Oil and Natural Gas Wholesale Markets

Perifanis

Dagoumas

2018

Energies

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“…Due to its multiple advantages, the NARDL technique has been used by many researchers in order to identify asymmetries arising due to economic shock. These studies include (Alsamara et al, 2017;Bagnai & Ospina 2016;Elafif et al, 2017;Mamun et al, 2016;Pal & Mitra 2015Salisu & Isah 2017;Shin et al, 2018). The relationship between inflow of remittances and CO2 emissions is expressed in the following functional form:…”

Section: Data Source and Methodologymentioning

confidence: 99%

Does the inflow of remittances cause environmental degradation? Empirical evidence from China

Ahmad

Haq

Khan

et al. 2019

Economic Research-Ekonomska Istraživanja

113

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Remittances inflow plays a significant role in promoting the economic welfare of a country; it has a multidimensional effect on the economy and links with the carbon emissions. This study examines the possible asymmetric transmissions from remittances to carbon dioxide emissions (CO2) in China using time series data from 1980 to 2014. The Non-linear NARDL method is employed to check the longrun asymmetric relationship between remittances inflow and carbon emissions. The findings show that a positive shock in remittances causes an increase in CO2 emissions, while a negative shock in remittances causes a decrease in CO2 emissions. The results support the existence of an asymmetric cointegrating relationship between remittances and CO2 emissions in both short run and the long run. The NARDL dynamic multiplier graph assumes that positive remittances shocks are highe compared to the negative remittances shocks. It suggests that policymakers in China should consider remittances as a policy instrument especially designing strategies and policies related to sustainable environmental quality in the long run.

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“…Other papers applied to the US economy using alternative econometric specifications are Balk et al. (), Radchenko (2005a), Al‐Gudhea, Kenc, and Dibooglu () and Pal and Mitra (), among others. By contrast, the papers of Bachmeier and Griffin () and Douglas () find no evidence of asymmetries in the US economy.…”

mentioning

confidence: 99%

Rockets and feathers behaviour in the Spanish gasoline and diesel market: New evidence

Martín‐Moreno

Pérez

Ruíz

2019

Bulletin of Econ Res

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In this paper we analyse the potential asymmetric response of retail prices for gasoline and diesel‐fuel to changes in oil prices for the Spanish economy and its relation with the so‐called ‘rockets and feathers’ behaviour. We show that the assumption made by previous studies, which use as the key explanatory variable the sign –positive or negative‐ of the change in international oil prices, is inadequate for the Spanish case and the magnitude of the change in international oil prices is also relevant. For small changes in international oil prices there is neither price asymmetry nor rockets and feathers behavior in the retail markets. However, price asymmetries in line with rockets and feathers behavior in retail gasoline and gasoil markets are present when these changes exceed a certain threshold. Following Martín‐Moreno et al. (2018) we first apply an Auto‐regressive Error Correction Model and endogenously estimate the threshold triggering the rockets and feathers behaviour. A time‐varying nature for the dynamic response of retail prices to oil price shocks is revealed when we estimate the TAR‐ECM model using rolling windows. Hence, in a second stage, we use a Markov‐switching estimation of the model to test the robustness of the results given its suitability to changing environments. This study could have relevant policy implications for the Spanish gasoline and gasoil retail markets due to the ongoing debate on the existence of a rockets and feathers behavior in gasoline and gasoil retail markets between the Spanish regulatory body and the oil companies.

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

Cited by 69 publications

References 39 publications

Price and Volatility Spillovers Between the US Crude Oil and Natural Gas Wholesale Markets

Price and Volatility Spillovers Between the US Crude Oil and Natural Gas Wholesale Markets

Does the inflow of remittances cause environmental degradation? Empirical evidence from China

Rockets and feathers behaviour in the Spanish gasoline and diesel market: New evidence

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