HOW CRUDE OIL PRICES AFFECT DIESEL PRICES IN UNITED STATES: AN EMPIRICAL ANALYSIS USING ARDL APPROACH

Year 2018, Volume: 2 Issue: 3, 64 - 74, 26.12.2018

Şebnem Çoban

Abstract

In this research, an in-depth analysis was conducted
on log-linear model in order to examine the relationship between the crude oil
and diesel prices. Generally, similar behavior may be observed between these
variables. For this purpose, unit root analysis was conducted on time series
data of log-linear model to examine if the series are stationary or
non-stationary. The series also were analyzed using Engle-Granger Cointegration
test to observe if they were co-integrated, and share the common stochastic
trend. Moreover, ARDL (Autoregressive distributed lag) analysis was also
conducted to examine the long-run relationship in this study. Monthly time
series data between April 1994 and October 2017 of US crude oil and diesel
prices have been used in this analysis. Empirical results clearly show that,
the diesel and crude oil prices have the same trend and move in a similar way
in time and there is an evidence that long-run relationship also exist.

Keywords

crude oil, diesel, log-linear model, unit root, co-integration

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