Responsiveness of Residential Electricity Demand in OECD Countries: A Panel Cointegation and Causality Analysis

Ronald Bernstein () and Reinhard Madlener
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Ronald Bernstein: E.ON Energy Research Center, Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University, Postal: Mathieustrasse 6, 52074 Aachen, Germany, http://www.eonerc.rwth-aachen.de/fcn

No 8/2011, FCN Working Papers from E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)

Abstract: In this paper we estimate residential electricity demand elasticities and conduct an analysis of the causal relationship between electricity demand, disposable income and electricity price for a group of several OECD members. We apply panel cointegration and Granger causality testing to a data set consisting of eighteen countries in the cross-sectional dimension and the years 1981–2008 in the time domain. Our results for the whole panel indicate a near unity income elasticity and an inelastic price elasticity of approximately –0.4 in the long run. These results are robust with regard to the estimation methods employed (group-means panel FMOLS and DOLS). In the short run, our estimates from an ECM indicate an income elasticity of 0.2 and a price elasticity of approximately –0.1. Moreover, our tests on Granger causality provide an indication for a bidirectional causal relationship between electricity consumption and economic growth. Hence, our findings are in favor of the feedback hypothesis.

Keywords: Residential electricity demand; Elasticities; Panel cointegration; Granger-causality; OECD countries (search for similar items in EconPapers)
JEL-codes: Q41 Q43 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:fcnwpa:2011_008

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