Asymmetric gasoline-oil price nexus: recent evidence from non-linear cointegration investigation

In this paper, weekly data from June 1986 to October 2018 is used to investigate the asymmetric relationship between oil prices (WTI Spot Price) and gasoline prices (New York Harbor Conventional Gasoline Regular Spot Price). The novel non-linear Autoregressive Distributed Lags (NARDL) approach of cointegration was adopted to examine the asymmetric association. The empirical results support long- and short-run asymmetry. Furthermore, the direction of causality between oil and gasoline prices is examined using the Toda and Yamamoto non-causality test. The results show bidirectional causality between oil prices (positive and negative innovations) and gasoline prices.