Revisiting income and price elasticity of gasoline demand in India: new evidence from cointegration tests

Kanjilal, Kakali; Ghosh, Sajal

doi:10.1007/s00181-017-1334-2

Cited by 15 publications

(9 citation statements)

References 49 publications

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“…In other words, the Johansen procedure indicates that a cointegration relationship exist between petrol prices and volume of petrol consumed. We were able to find one analysis in the literature that in this regard is close to this study, specifically [43] investigate cointegration among petrol demand, real price of petrol, and real GDP for India for the period 1971-1972 and 2012-2013. They also estimates short-run and long-run elasticity of petrol demand with respect to its price and GDP.…”

Section: Johansen's Testmentioning

confidence: 73%

Econometric Analysis of Demand for Petrol in India, 1966-2019

Shaw¹

2020

SSRN Journal

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This study uses single-equation dynamic models to estimate petrol demand in India. Estimated long-run elasticities are higher than their short-run counterparts, which is in line with expectations based on the existing literature. We find price elasticities of -0.418 (long-run) and -0.189 (short run), which indicates that when price increases by 10%, demand tends to reduce by approximately 4% as consumers adjust their consumption behaviour. Prices appear to be more elastic in India rather than USA where studies estimate petrol elasticities to be in the range of -0.02 to -0.04 in the short term. We further find evidence that long-run elasticities are not as high as estimated elsewhere. We address issues around modelling of habit formation, habit persistence, and unobserved heterogeneity. Results are essential for transportation policymaking, especially in the context of taxation, understanding price stability, estimating the effects of duty increases on demand, and the potential implications for carbon taxes. The results are also important for wider policy considerations such as climate protections goals, reducing local emissions, dependency on fossil fuels, and strategic energy security.

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Section: Johansen's Testmentioning

confidence: 73%

Econometric Analysis of Demand for Petrol in India, 1966-2019

Shaw¹

2020

SSRN Journal

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“…According to the results obtained, if the income of people living in the country increases, there will be more demand for gasoline. Kanjilal and Ghosh [6] and Mensah et al [35] conducted a study on India and Ghana and emphasized the same issue. Saelim [9], Chi [20] and Liu [11] are other researchers supporting this result.…”

Section: Literature Review On Gasoline Demandmentioning

confidence: 99%

“…Therefore, any increase in the price can have an important effect on their gasoline demand behavior. In other words, it can be said that gasoline demand is very price sensitive [6]. From the economic agents' perspective, life today can be considered as a load being carried from now into the future; a huge portion of gasoline is being consumed.…”

Section: Introductionmentioning

confidence: 99%

Elasticity Analysis of Fossil Energy Sources for Sustainable Economies: A Case of Gasoline Consumption in Turkey

et al. 2020

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The current paper investigates the gasoline demand relationship in the case of Turkey, utilizing different econometric techniques and using quarterly data spanning from 2000Q1 to 2019Q1. The estimation results revealed that income and gasoline price are the main drivers of consumption. The found long-run income, price and auto stock elasticities are 0.25, −0.27 and −0.80, respectively. In addition, it is concluded that in the short-run, gasoline demand does not respond to changes in income, price and car stock. The estimation results also showed that the contribution of commercial and public car stock on gasoline demand is higher than that for private auto stock. Based on the finding of the study it is concluded that to achieve the optimal use of gasoline in line with providing high quality transport services, firstly, policies before the 2012 period can be followed. Secondly, channels such as pricing mechanism and taxation policies can be used in this framework.

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“…Based on their discovery, they infer that economic agents react to energy products' price changes, but the reactions are greater in the long run than in the short run. Kanjilal and Ghosh (2018) also examined the income and price elasticities of gasoline demand in India using monthly time series data from 1972 to 2013. The evidence from the ARDL framework reveals that gasoline demand is highly elastic in response to changes in income and prices in the long run while in the short run, it is inelastic.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Additionally, most previous studies were subsumed within linear and symmetric assumptions. This include Kanjilal and Ghosh (2018); Ghoddusi et al (2019). According to Hamilton (2003), Liddle and Sadorsky (2020), the assumption of symmetric and linearity in economic relationships has the potential to bias the elasticity estimates and invariably leads to erroneous conclusions.…”

Section: Introductionmentioning

confidence: 99%

Price, income and exchange rate asymmetric elasticities of oil consumption in Greece, Ireland, Italy, Portugal and Spain

Uche

2022

OPEC Energy Review

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The dynamic relationship between oil price variations, changing income, exchange rate deviations and oil consumption has preoccupied the minds of many energy researchers albeit contradicting submissions. On this note, this study seeks to evaluate the possible asymmetric impact of the aforementioned variables on oil consumption in selected European countries, including Greece, Ireland, Italy, Portugal and Spain between 2000Q1 and 2018Q4. To that effect, after ascertaining the existence of cointegration, the study applied the nonlinear ARDL technique in evaluating the asymmetric effects of oil price, income and exchange rate on oil consumption in these countries. The cointegration tests reveals a long-run relationship among the variables in all the countries. Also discovered is an asymmetric pass-through from oil prices to oil consumption in Portugal, Ireland and Spain. Whereas in Ireland, Italy and Spain, an asymmetric relationship exists between oil consumption and national income, while asymmetric effects flow from the exchange rate to oil consumption in Ireland and Spain. Therefore, to ensure optimal resource allocations in these countries, the existence of asymmetric effects must not be taken for granted. Meanwhile, a onesize-fits-all strategy may not yield the expected results in these countries.

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Revisiting income and price elasticity of gasoline demand in India: new evidence from cointegration tests

Cited by 15 publications

References 49 publications

Econometric Analysis of Demand for Petrol in India, 1966-2019

Econometric Analysis of Demand for Petrol in India, 1966-2019

Elasticity Analysis of Fossil Energy Sources for Sustainable Economies: A Case of Gasoline Consumption in Turkey

Price, income and exchange rate asymmetric elasticities of oil consumption in Greece, Ireland, Italy, Portugal and Spain

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