Threshold effects of energy price changes

Daan van Soest, Gerard Kuper and Jan Jacobs

No 200007, CCSO Working Papers from University of Groningen, CCSO Centre for Economic Research

Abstract: This paper presents a theoretical model emphasising energy investments’ characteristics of uncertainty and irreversibility. The theoretical model suggests threshold effects. Firms are induced to substitute away from energy only if prices of energy exceed a certain threshold level and they reverse the technology only if energy prices are low enough. Estimating a simple investment relation using panel data for the Dutch economy, we find evidence for threshold effects.

Date: 2000
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Related works:
Working Paper: Threshold Effects of Energy Price Changes (2000)
Working Paper: Threshold effects of energy price changes (2000)
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