Structural Breaks, Parameter Stability and Energy Demand Modeling in Nigeria

Olusegun Omisakin (), Oluwatosin Adeniyi () and Mutiu Oyinlola ()

International Journal of Business and Economic Sciences Applied Research (IJBESAR), 2012, vol. 5, issue 2, 129-144

Abstract: This paper extends previous studies in modeling and estimating energy demand functions for both gasoline and kerosene petroleum products for Nigeria from 1977 to 2008. In contrast to earlier studies on Nigeria and other developing countries, this study specifically tests for the possibility of structural breaks/regime shifts and parameter instability in the energy demand functions using more recent and robust techniques. In addition, the study considers an alternative model specification which primarily captures the price-income interaction effects on both gasoline and kerosene demand functions. While the conventional residual-based cointegration tests employed fail to identify any meaningful long run relationship in both functions, the Gregory-Hansen structural break cointegration approach confirms the cointegration relationships despite the breakpoints. Both functions are also found to be stable under the period studied. The elasticity estimates also follow the a priori expectation being inelastic both in the long- and short run for the two functions.

Keywords: Energy demand modeling; structural breaks; parameter stability; cointegration (search for similar items in EconPapers)
JEL-codes: C13 C22 C51 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:tei:journl:v:5:y:2012:i:2:p:129-144

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