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Carlos Frederico A. Uchoa, Cleiton S. de Jesus and Leonardo C. B. Cardoso
''The asymmetric pattern of fuel demand in Brazil''
( 2021, Vol. 41 No.1 )
In Brazil, since most of the fleet consists of flexible-fuel vehicles, the ethanol-to-gasoline price ratio affect demand. In this study, we address the asymmetric behavior of demand estimating a dynamic panel with threshold effect. Based on municipal data from 2007 to 2017, we estimate a threshold close to 71% for ethanol and 66% for gasoline. The estimated elasticities differ from one regime to another, depending on the ethanol-to-gasoline price ratio. Our findings therefore contribute to an understanding of how price ratio affects the demand for both fuels, supporting the design of public policies aimed at a transition to biofuels.
Keywords: Elasticity, Ethanol and gasoline, Dynamic panel data, Threshold, Nonlinearity.
JEL: Q4 - Energy: General
Q3 - Nonrenewable Resources and Conservation: General
Manuscript Received : May 21 2020 Manuscript Accepted : Mar 10 2021

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