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Dynamics analysis of factors affecting electricity consumption fluctuations based on economic conditions: Application of SVAR and TVP-VAR models

Parisa Esmaeili and Meysam Rafei

Energy, 2021, vol. 226, issue C

Abstract: Iran is known as a high electricity-consuming country that has an undeniable share in total energy consumption. Therefore, we intend to scrutinize the impact of structural shocks of GDP, oil revenues, and inflation on Iran’s electricity consumption. Thereby, we combined SVAR with DAG technique to describe economic structures and Markov-switching in line with the TVP-VAR model to examine Iran style facts. The SVAR model results represent that inflation shocks have a significant effect on electricity consumption, while the effects of GDP and oil revenues are insignificant. Meanwhile, the most effective variable on electricity consumption fluctuations is inflation, which affects electricity consumption negatively and strongly. TVP-VAR model results show that electricity consumption is affected by structural shocks of variables differently depending on Iran’s economic conditions. Thereby, electricity consumption responds positively to the shocks of variables in most periods and years. Since 2011, when sanctions were imposed on Iran, the effect of structural shocks of variables on electricity consumption has become weaker. Finally, we proposed to policymakers to adopt energy conservation policies based on Iran’s economic and political realities. Iran must also reduce its dependence on oil revenues and imported energy equipment so that sanctions do not significantly affect the country’s economy.

Keywords: Electricity consumption; Shock; SVAR; TVP-VAR; Markov-switching; PC algorithm (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:226:y:2021:i:c:s0360544221005892

DOI: 10.1016/j.energy.2021.120340

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