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Price Adjustments by a Gasoline Retail Chain

Price Adjustments by a Gasoline Retail Chain We use daily data to examine price responses in the Swedish gasoline market to changes in the Rotterdam spot price, exchange rates and taxes. The distribution of price adjustments by a leading retail chain, for the period January 1980 to December 1996, is symmetric with no small adjustments. An error correction model shows that, in the short run, prices gradually move towards the long‐run equilibrium in response to cost shocks. There is some evidence that, also in the short run, prices are stickier downwards than upwards. Prices respond more rapidly to exchange rate movements than to the spot market price. Our analysis emphasizes that to fully understand price adjustments it is necessary to examine data sets where the sample frequency at least matches that of price adjustments. JEL classification: C22; E31; F14; L71 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Scandinavian Journal of Economics Wiley

Price Adjustments by a Gasoline Retail Chain

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References (39)

Publisher
Wiley
Copyright
The Editors of the Scandinavian Journal of Economics 2000
ISSN
0347-0520
eISSN
1467-9442
DOI
10.1111/1467-9442.00186
Publisher site
See Article on Publisher Site

Abstract

We use daily data to examine price responses in the Swedish gasoline market to changes in the Rotterdam spot price, exchange rates and taxes. The distribution of price adjustments by a leading retail chain, for the period January 1980 to December 1996, is symmetric with no small adjustments. An error correction model shows that, in the short run, prices gradually move towards the long‐run equilibrium in response to cost shocks. There is some evidence that, also in the short run, prices are stickier downwards than upwards. Prices respond more rapidly to exchange rate movements than to the spot market price. Our analysis emphasizes that to fully understand price adjustments it is necessary to examine data sets where the sample frequency at least matches that of price adjustments. JEL classification: C22; E31; F14; L71

Journal

The Scandinavian Journal of EconomicsWiley

Published: Mar 1, 2000

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