Structural shocks and dynamic elasticities in a long memory model of the US gasoline retail market

Structural shocks and dynamic elasticities in a long memory model of the US gasoline retail market A structural multivariate long memory model of the US gasoline market is employed to disentangle structural shocks and to estimate the own-price elasticity of gasoline demand. Our main empirical findings are: (1) there is strong evidence of nonstationarity and mean reversion in the real price of gasoline and in gasoline consumption; (2) accounting for the degree of persistence present in the data is essential to assess the responses of these two variables to structural shocks; (3) the contributions of the different supply and demand shocks to fluctuations in the gasoline market vary across frequency ranges; and (4) long memory makes available an interesting range of convergent possibilities for gasoline demand elasticities. Our estimates suggest that after a change in prices, consumers undertake a few measures to reduce consumption in the short- and medium-run but are reluctant to implement major changes in their consumption habits. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Empirical Economics Springer Journals

Structural shocks and dynamic elasticities in a long memory model of the US gasoline retail market

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Publisher
Springer Berlin Heidelberg
Copyright
Copyright © 2016 by Springer-Verlag Berlin Heidelberg
Subject
Economics; Econometrics; Statistics for Business/Economics/Mathematical Finance/Insurance; Economic Theory/Quantitative Economics/Mathematical Methods
ISSN
0377-7332
eISSN
1435-8921
D.O.I.
10.1007/s00181-016-1145-x
Publisher site
See Article on Publisher Site

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