Petrol Price Asymmetries Revisited

An error correction model is fitted to monthly data on net retail prices for the United Kingdom over the period January 1982 to June 1995 in order to examine the short-run response of retail petrol prices to changes in input costs and the exchange rate. The hypothesis of a symmetric response by petrol retailers to crude price rises and falls is rejected by the data over the period examined. A similar hypothesis in regard to the exchange rate is also rejected by the data.