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Modelling Fuel Prices. An I(1) Analysis

Author

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  • Katarzyna Leszkiewicz-Kędzior

    (University of Lodz)

Abstract

This article analyses fuel pricing in Poland in the period January 2000 - March 2011. Two levels of prices are considered: wholesale prices set by Polish refineries and retail prices paid at petrol stations. Because refinery product prices are strongly dependent on the zloty exchange rate, a large part of the article deals with the modelling of the PLN/EUR exchange rate, in which process a CHEER model is used. The multivariate cointegration analysis showed that the wholesale and retail prices of fuels and the exchange rate are linked through long-run relationships. As demonstrated, the wholesale price of fuel depends on the crude-oil price and the PLN/EUR exchange rate. Another finding is that changes in the wholesale price are fully transmitted to retail prices. As far as the exchange rate is concerned, the real interest rate parity hypothesis has been confirmed, as well as the significance of the risk as perceived by financial investors.

Suggested Citation

  • Katarzyna Leszkiewicz-Kędzior, 2011. "Modelling Fuel Prices. An I(1) Analysis," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 3(2), pages 75-95, June.
    • Handle: RePEc:psc:journl:v:3:y:2011:i:2:p:75-95
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    fuel prices; real exchange rate; CHEER model; cointegration;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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