Abstract
It is extremely crucial for Japan to reduce automobile's gasoline consumption so as to meet the first period target of the Kyoto Protocol. However, only few studies which focus on the relation among gasoline demand, price, and regional gross income can be found. In this context, while taking into account the stationarity and cointegration of variables as well as regional characteristics, this study investigated Granger causality by using vector error correction (VEC) model, based on a panel data set of 10 Japanese regions during 1990-2008. As a result, this study shows that there are bidirectional negative causalities between gasoline price and its consumption, and bidirectional positive/negative causalities between gasoline price and regional income. It is also found that there is a unidirectional positive causality from gasoline consumption to regional income.
