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On the estimation of the price elasticity of electricity demand in the manufacturing industry of Colombia

Jorge Barrientos (), Esteban Velilla (), David Tobón Orozco, Fernando Villada () and Jesús M. López Lezama ()

Revista Lecturas de Economía, 2018, issue 88, 155-182

Abstract: Abstract: This paper presents an estimation of the reaction of electricity demand to changes in price levels of forward contracts in the manufacturing industry of Colombia. To that end, a structural vector autoregressive (SVAR) model was developed, considering several economic activities at different voltage levels. The industrial sectors under study showed an electricity demand not significantly sensitive to price variations. However, the food and drink sectors, plastic and rubber manufacturing, as well as retail trade turned out to be more sensitive to price shocks than the chemical industry or textile manufacturing. Such inelasticity could be softened if information concerning prices and quantity demanded were of common knowledge, or if the forward curve were observable. Resumen En este artículo se presenta una estimación de la reacción de la demanda a niveles de precios de contratos forward de electricidad en la industria manufacturera de Colombia. Se desarrolló un modelo de vectores autorregresivos estructurales (SVAR) considerando varias actividades económicas a diferentes niveles de tensión. Los sectores industriales bajo estudio no mostraron una demanda de electricidad significativamente sensible a variaciones de precios. Sin embargo, los sectores de alimentos y bebidas, caucho y plástico, así como el sector comercial minorista resultaron ser más sensibles a choques de precios que la industria química o el sector de manufactura de textiles. Dicha inelasticidad podría suavizarse si la información concerniente a precios y cantidades demandadas fuera de conocimiento común, o si la curva forward pudiera ser observable.

Keywords: mercados de electricidad; contratos forward; elasticidad precio de la demanda; modelos SVAR (search for similar items in EconPapers)
JEL-codes: D43 D61 L13 L43 Q41 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
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Journal Article: On the estimation of the price elasticity of electricity demand in the manufacturing industry of Colombia (2018) Downloads
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Handle: RePEc:col:000174:016027