Price Adjustment in Taiwan Retail Gasoline Market

Abstract

This paper uses weekly data over a sample research period of 2002M4 - 2011M11 to estimate the impact of crude oil price on pre-tax retail gasoline price in Taiwan. We found that there is a significant, long-run equilibrium relationship between crude oil price and retail gasoline price. In the asymmetric ECM framework, this paper finds that there was distributed lag effect symmetry (DLES) between oil price and retail gasoline price. By the cumulated adjustment function, we show that retail gasoline price in Taiwan respond more quickly to reductions in crude oil price.