Estimating underlying energy demand trends using UK annual data

John Dimitropoulos, Lester Hunt and Guy Judge

Applied Economics Letters, 2005, vol. 12, issue 4, 239-244

Abstract: Employing the Structural Time Series Model (STSM) approach suggested by Harvey (1997), and based on annual data for the UK from 1967-2002, this paper reiterates the importance of using a stochastic rather than a linear deterministic trend formulation when estimating energy demand models, a practice originally established by Hunt et al. (2003a, 2003b) using quarterly UK data. The findings confirm that important non-linear and stochastic trends are present as a result of technical change and other exogenous factors driving demand, and that a failure to account for these trends will lead to biased estimates of the long-run price and income elasticities. The study also establishes that, provided these effects are allowed for, the estimated long-run elasticities are robust to the different data frequencies used in the modelling.

Date: 2005
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Working Paper: Estimating Underlying Energy Demand Trends using UK Annual Data (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:12:y:2005:i:4:p:239-244

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DOI: 10.1080/1350485052000337789

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