Short-Run and Long-Run Elasticities of Diesel Demand in Korea

Kyoung-Min Lim, Myunghwan Kim, Chang Seob Kim and Seung-Hoon Yoo ()
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Kyoung-Min Lim: Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 139-743, Korea
Myunghwan Kim: Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 139-743, Korea
Chang Seob Kim: Department of Energy IT, Gachon University, Bokjeong-dong, Sujeong-gu, Seongnam-si, Gyeonggi-do 461-701, Korea

Energies, 2012, vol. 5, issue 12, 1-10

Abstract: This paper investigates the demand function for diesel in Korea covering the period 1986–2011. The short-run and long-run elasticities of diesel demand with respect to price and income are empirically examined using a co-integration and error-correction model. The short-run and long-run price elasticities are estimated to be ?0.357 and ?0.547, respectively. The short-run and long-run income elasticities are computed to be 1.589 and 1.478, respectively. Thus, diesel demand is relatively inelastic to price change and elastic to income change in both the short-run and long-run. Therefore, a demand-side management through raising the price of diesel will be ineffective and tightening the regulation of using diesel more efficiently appears to be more effective in Korea. The demand for diesel is expected to continuously increase as the economy grows.

Keywords: elasticity; diesel demand; Korea; co-integration; error-correction model (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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