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Price Adjustments by a Gasoline Retail Chain
Author(s) -
Asplund Marcus,
Eriksson Rickard,
Friberg Richard
Publication year - 2000
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00186
Subject(s) - economics , spot contract , gasoline , sample (material) , econometrics , exchange rate , monetary economics , spot market , short run , producer price index , wholesale price index , mid price , price level , financial economics , futures contract , electricity , chemistry , physics , electrical engineering , chromatography , thermodynamics , engineering
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: C 22; E 31; F 14; L 71