A Dy n a mic Ge n er a l Eq u ilib r iu mM odel of Driving, Gasoline Useand Vehicle Fuel E fficiencyChao Wei1Departm ent of Econom icsGeorge Washington [email protected] 10, 2009AbstractThe paper constructs a dynamic stoc hastic general equilibrium model tostudy the endogenous determination of gasoline use, driving and v ehicle fuelefficiency. Before v ehicles are produced, their fuel efficiency can be c hosen op -timally. Once produced, their fuel efficiency cannot be c hanged. The modelgenerates endogenously d ifferen t short-run and long-run price and incomeelasticities of gasoline use and vehicle miles of tra vel. We find that althoughgasoline taxes, the CA FE standard and mileage taxes can all reduce gasolineuse in the long run, they are different in terms of the magnitude of responsesand the dynamic paths followed b y key variables.JEL code: Q43, Q48, E60, H23Key w ords: fuel efficienc y, v e hicle miles of tra vel, putty -clay, gasolinetaxes, CAFE, mileage taxes1I would like to thank David Austin, Jame s Hamilton, Mark Jacobsen, Shanjun Li,Brett Rayner, Roberto Samaniego, Marika Santoro, Anthony Yezer and seminar partic-ipan ts at the Midwest Macro Meetings 2009 and the George Washington University forhelpful comments and suggestions. Department of Economics, 2115 G Street NW, Wash-ington, DC 20052. Email: [email protected], Tel: