Interfuel Substitution: Evidence from the Markov Switching Minflex Laurent Demand System with BEKK Errors

Apostolos Serletis and Libo Xu
Authors registered in the RePEc Author Service: Apostolos Serletis

The Energy Journal, 2019, vol. Volume 40, issue Number 6

Abstract: We investigate interfuel substitution in the United States using the minflex Laurent demand system and a century of data (from 1919 to 2012). We relax the assumption of constant parameters in the demand system, and also relax the homoskedasticity assumption, instead assuming that the covariance matrix of the errors is time-varying. Our results are consistent with theoretical regularity and indicate that the Morishima elasticities of substitution are always positive for all pairs of the energy goods (suggesting substitutability), but exhibit large swings across two regimes, generally being higher in the high demand volatility regime before the 1950s.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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Journal Article: Interfuel Substitution: Evidence from the Markov Switching Minflex Laurent Demand System with BEKK Errors (2019)
Working Paper: Interfuel Substitution: Evidence from the Markov Switching Minflex Laurent Demand System with BEKK Errors (2019)
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