Abstract
In this paper, we examine asymmetric causal relationships between gasoline prices and economic policy uncertainty in a panel of 18 countries over the period 1998–2017, using the recently introduced panel causality approach of Hatemi et al (Appl Econ, 48:2301–2308, 2016) that accounts for asymmetric dynamics and is robust to both cross-sectional dependence and slope heterogeneity. Empirical findings reveal asymmetric causal relationships between gasoline prices and economic policy uncertainty in the sampled countries. Specifically, results show that economic policy uncertainty and gasoline prices have positive and negative asymmetric bidirectional causal relations in 13 countries. No feedback causality was detected between gasoline prices and economic policy uncertainty in 5 countries. Based on the results, we infer that positive and negative asymmetric causal relations exist between economic policy uncertainty and gasoline price, with attendant policy implications in sampled regions.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Antonakakis N, Chatziantoniou I, Filis G (2014) Dynamic spillovers of oil price shocks and economic policy uncertainty. Energy Econ 44:433–447
Apergis N, Vouzavalis G (2018) Asymmetric pass through of oil prices to gasoline prices: evidence from a new country sample. Energy Policy 114:519–528
Bacon RW (1991) Rockets and feathers: the asymmetric speed of adjustment of UK retail gasoline prices to cost changes. Energy Econ 13(3):211–218
Baker SR, Bloom N, Davis SJ, 2013. Measuring economic policy uncertainty. Stanford University and University of Chicago Booth School of Business
Baker SR, Bloom N, Davis SJ (2016) Measuring economic policy uncertainty. Q J Econ 131(4):1593–1636
Balke NS, Brown SP, Yücel MK (2002) Oil price shocks and the US economy: where does the asymmetry originate? Energy J 23:27–52
Bekiros S, Gupta R, Paccagnini A (2015) Oil price forecastability and economic uncertainty. Econ Lett 132:125–128
Bettendorf L, Van Der Geest SA, Varkevisser M (2003) Price asymmetry in the Dutch retail gasoline market. Energy Econ 25(6):669–689
Bloom N (2009) The impact of uncertainty shocks. Econometrica 77(3):623–685
Borenstein S, Cameron AC, Gilbert R (1997) Do gasoline prices respond asymmetrically to crude oil price changes? Q J Econ 112(1):305–339
Brown SP, Yücel MK (2002) Energy prices and aggregate economic activity: an interpretative survey. Q Rev Econ Finance 42(2):193–208
Chou KW, Tseng YH (2016) Oil prices, exchange rate, and the price asymmetry in the Taiwanese retail gasoline market. Econ Model 52:733–741
Cunado J, De Gracia FP (2005) Oil prices, economic activity and inflation: evidence for some Asian countries. Q Rev Econ Finance 45(1):65–83
Davis SJ, Haltiwanger J (2001) Sectoral job creation and destruction responses to oil price changes. J Monet Econ 48(3):465–512
Emirmahmutoglu F, Kose N (2011) Testing for Granger causality in heterogeneous mixed panels. Econ Model 28(3):870–876
Filis G, Degiannakis S, Floros C (2011) Dynamic correlation between stock market and oil prices: the case of oil-importing and oil-exporting countries. Int Rev Financ Anal 20(3):152–164
Granger CW (1969) Investigating causal relations by econometric models and cross-spectral methods. Econometrica: Journal of the Econometric Society 37:424–438
Hamilton JD (1983) Oil and the macroeconomy since World War II. J Polit Econ 91(2):228–248
Hamilton JD (1988). Are the macroeconomic effects of oil-price changes symmetric?: A comment. In Carnegie-Rochester conference series on public policy (vol. 28, pp. 369–378). North-Holland
Hamilton JD (2008). Understanding crude oil prices (no. w14492). National Bureau of Economic Research
Hamilton JD (2009). Causes and consequences of the oil shock of 2007–08 (no. W15002). National Bureau of Economic Research
Hamilton JD (2011) Nonlinearities and the macroeconomic effects of oil prices. Macroecon Dyn 15(S3):364–378
Handley K, Limao N (2015) Trade and investment under policy uncertainty: theory and firm evidence. Am Econ J Econ Pol 7(4):189–222
Hatemi J A (2011). Actest: gauss module to apply asymmetric causality tests
Hatemi JA, Ajmi AN, El Montasser G, Inglesi-Lotz R, Gupta R (2016) Research output and economic growth in G7 countries: new evidence from asymmetric panel causality testing. Appl Econ 48(24):2301–2308
Honarvar A (2009) Asymmetry in retail gasoline and crude oil price movements in the United States: an application of hidden cointegration technique. Energy Econ 31(3):395–402
Hurlin C 2008. Testing for Granger non-causality in heterogeneous panels. Working papers Halshs-00224434, version 1
International Monetary Fund. (2014). World economic outlook: legacies, clouds, uncertainties. IMF Press. http://www.imf.org/external/pubs/ft/weo/2014/02/(accessed December 20, 2017)
Kang W, Ratti RA (2013) Structural oil Price shocks and policy uncertainty. Econ Model 35:314–319
Kang W, De Gracia FP, Ratti RA (2017a) Oil price shocks, policy uncertainty, and stock returns of oil and gas corporations. J Int Money Financ 70:344–359
Kang W, Lee K, Ratti RA (2014) Economic policy uncertainty and firm-level investment. J Macroecon 39:42–53
Kang W, Ratti RA, Vespignani JL (2017b) Oil price shocks and policy uncertainty: new evidence on the effects of us and non-us oil production. Energy Econ 66:536–546
Kilian L (2009) Not all oil price shocks are alike: disentangling demand and supply shocks in the crude oil market. Am Econ Rev 99(3):1053–1069
Kilian L, Park C (2009) The impact of oil price shocks on the US stock market. Int Econ Rev 50(4):1267–1287
Kilian L, Vigfusson RJ (2011) Nonlinearities in the oil price–output relationship. Macroecon Dyn 15(S3):337–363
Kónya L (2006) Exports and growth: Granger causality analysis on OECD countries with a panel data approach. Econ Model 23(6):978–992
Kristoufek L, Lunackova P (2015) Rockets and feathers meet Joseph: reinvestigating the oil–gasoline asymmetry on the international markets. Energy Econ 49:1–8
Lardic S, Mignon V (2008) Oil prices and economic activity: an asymmetric cointegration approach. Energy Econ 30(3):847–855
Lee K, Ni S, Ratti RA (1995) Oil shocks and the macroeconomy: the role of price variability. Energy J 16:39–56
Liu MH, Margaritis D, Tourani-Rad A (2010) Is there an asymmetry in the response of diesel and petrol prices to crude oil price changes? Evidence from New Zealand. Energy Econ 32(4):926–932
Mork KA (1989) Oil and the macroeconomy when prices go up and down: an extension of Hamilton’s results. J Polit Econ 97(3):740–744
Mory JF (1993) Oil prices and economic activity: is the relationship symmetric? Energy J:151–161
Pal D, Mitra SK (2016) Asymmetric oil product pricing in India: evidence from a multiple threshold nonlinear ARDL model. Econ Model 59:314–328
Pastor L, Veronesi P (2012) Uncertainty about government policy and stock prices. J Financ 67(4):1219–1264
Pástor Ľ, Veronesi P (2013) Political uncertainty and risk premia. J Financ Econ 110(3):520–545
Rodrik D (1991) Policy uncertainty and private investment in develo** countries. J Dev Econ 36(2):229–242
Stern DI (1993) Energy and economic growth in the USA: a multivariate approach. Energy Econ 15(2):137–150
Author information
Authors and Affiliations
Corresponding author
Additional information
Responsible editor: Muhammad Shahbaz
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Olanipekun, I., Olasehinde-Williams, G. & Akadiri, S.S. Gasoline prices and economic policy uncertainty: what causes what, and why does it matter? Evidence from 18 selected countries. Environ Sci Pollut Res 26, 15187–15193 (2019). https://doi.org/10.1007/s11356-019-04949-x
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11356-019-04949-x