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OIL, UNCERTAINTY, AND GASOLINE PRICES

Published online by Cambridge University Press:  18 August 2016

Dongfeng Chang  and
Apostolos Serletis
Dongfeng Chang
Affiliation:
Shandong University
Apostolos Serletis*
Affiliation:
University of Calgary
*
Address correspondence to: Apostolos Serletis, Department of Economics, University of Calgary, Calgary, Alberta T2N 1N4, Canada. E-mail: [email protected].
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Abstract

In this paper we investigate the relationship between crude oil and gasoline prices and also examine the effect of oil price uncertainty on gasoline prices. The empirical model is based on a structural vector autoregression that is modified to accommodate multivariate GARCH-in-Mean errors. We use monthly data for the United States over the period from January 1976 to September 2014. We find that there is an asymmetric relationship between crude oil and gasoline prices, and that oil price uncertainty has a positive effect on gasoline price changes. Our results are robust to alternative model specifications and alternative measures of the price of oil.

Keywords

Oil Price VolatilityGARCH-in-Mean VAR
Type
Articles
Information
Macroeconomic Dynamics , Volume 22 , Special Issue 3: Dynamics of Oil and Commodities Prices , April 2018 , pp. 546 - 561
Copyright
Copyright © Cambridge University Press 2016 

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Footnotes

This paper is based on Chapter 3 of Dongfeng Chang's Ph.D. dissertation at the University of Calgary. The research has been supported in part by the Fundamental Research Funds of Shandong University. We would like to thank the following members of Dongfeng's dissertation committee: Herbert Emery, Daniel Gordon, Ron Kneebone, David Walls, and Philip Chang.

References

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