turkmath.org

This study analyzes asymmetric adjustment properties of pre-tax diesel prices to changes in crude oil price and exchange rate in 27 European countries. The Nonlinear Autoregressive Distributed Lag (NARDL) model is used to capture asymmetric adjustment characteristics of diesel prices both in the short and long-run. The findings of the study imply that diesel prices give more response to crude oil price decreases than increases in the long-run. In the short-run however, the opposite is observed. Considering the exchange rate shocks, depreciation of local currency against the US dollar is more effective on asymmetric adjustment of diesel prices than appreciation both in the short and long-run. Also, diesel prices are more sensitive to exchange rate changes than crude oil price changes and this result is the same across all countries considered.