![]() The current situation can be utilized to increase energy efficiency and implement eco-friendly technologies. The small price elasticity allows to say that if policy makers plan to reduce gasoline consumption then increasing its price would not substantially reduce the consumption. An increase in income elasticity might be the cause of the inefficiency of the existing vehicles. Research results show that since the income elasticity of demand is not constant, the use of constant elasticities obtained in previous studies might be misleading for policymaking purposes. ![]() ![]() The policy implications are discussed based on the findings of the study. In the short run, gasoline demand does not respond to the changes in income and price. Income elasticity increases over time, slightly decreasing close to the end of the period, which is specific for a developing country. The income elasticity found ranges from 0.10 to 0.29, while the price elasticity remains constant over time, being −0.15. The empirical estimations concluded a cointegration relationship between gasoline demand, income, and gasoline price. This study investigates the income and price elasticities of gasoline demand for a fuel subsidizing country case, applying three different time-varying coefficient approaches to the data spanning the period from January 2002 to June 2018.
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