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Finite sample inference methods for dynamic energy demand models

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  • Jean-Thomas Bernard

    (Holder of the Chair on the Economics of Electric Energy; Groupe de recherche en économie de l'énergie, de l'environnement et des ressources naturelles [GREEN], Université Laval. Mailing address: Pavillon J.-A.-De Sève, Ste-Foy, Québec, Canada, G1K 7P4)

  • Nadhem Idoudi

    (Conseiller Co�ts et caractéristiques de la consommation, Direction des Affaires réglementaires et tarifaires, Hydro-Québec Distribution, and Groupe de recherche en économie de l'énergie, de l'environnement et des ressources naturelles [GREEN], Université Laval. Mailing address: 75, boul. René-Lévesque ouest, 2e étage, Montréal, (Québec) H2Z 1A4)

  • Lynda Khalaf

    (Holder of the Canada Research Chair in Environment; Centre interuniversitaire de recherche en économie quantitative (CIREQ) and Economics Department, Carleton University, Loeb Building 1125 Colonel By Drive, Ottawa, Ont., Canada K1S 5B6)

  • Clément Yélou

    (Département d'économique, Groupe de recherché en économie de l'énergie, de l'environement et des ressources naturelles [GREEN], and Centre de recherche en économie agroalimentaire (CRÉA), Université Laval. Jean-Talon Building, B-5, Statistics Canada, 170 Tunney's Pasture Driveway, Ottawa ON K1A 0T6)

Abstract

This paper considers finite sample motivated inference methods in dynamic energy demand models, in which case commonly used econometric methods remain asymptotic. We focus on structural stability, and on exact confidence set estimation of elasticities. We account for intractable and nuisance parameter dependant distributions through Monte Carlo test procedures. For long-run elasticities which depend on parameter ratios, we assess available asymptotic and exact methods with Fieller based alternatives. Fieller based and exact methods invert approximate and exact relevant test criteria (respectively) and may lead to unbounded set estimates. Our empirical results underscore the importance of using identification-robust inference methods. Copyright © 2007 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 22 (2007)
Issue (Month): 7 ()
Pages: 1211-1226

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Handle: RePEc:jae:japmet:v:22:y:2007:i:7:p:1211-1226

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  1. Dufour, J.M. & Kiviet, J.F., 1995. "Exact Inference Methods for First-Order Autoregressive Distributed Lag Models," Cahiers de recherche 9547, Universite de Montreal, Departement de sciences economiques.
  2. Dermot Gately & Hiliard G. Huntington, 2002. "The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 19-55.
  3. Dufour, J.M. & Kiviet, J.F., 1995. "Exact Tests in Single Equation Autoregressive Distributed Lag Models," Cahiers de recherche 9549, Universite de Montreal, Departement de sciences economiques.
  4. Jean-Marie Dufour, 2005. "Monte Carlo tests with nuisance parameters: a general approach to finite-sample inference and non-standard asymptotics," CIRANO Working Papers 2005s-02, CIRANO.
  5. James M. Griffin & Craig T. Schulman, 2005. "Price Asymmetry in Energy Demand Models: A Proxy for Energy-Saving Technical Change?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-22.
  6. Dunstan, Roger H. & Schmidt, Ronald H., 1988. "Structural changes in residential energy demand," Energy Economics, Elsevier, vol. 10(3), pages 206-212, July.
  7. Savin, N.E., 1984. "Multiple hypothesis testing," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 14, pages 827-879 Elsevier.
  8. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-29, October.
  9. McAvinchey, Ian D. & Yannopoulos, Andreas, 2003. "Stationarity, structural change and specification in a demand system: the case of energy," Energy Economics, Elsevier, vol. 25(1), pages 65-92, January.
  10. Jean-Marie Dufour, 1997. "Some Impossibility Theorems in Econometrics with Applications to Structural and Dynamic Models," Econometrica, Econometric Society, vol. 65(6), pages 1365-1388, November.
  11. Dufour, Jean-Marie & Kiviet, Jan F., 1996. "Exact tests for structural change in first-order dynamic models," Journal of Econometrics, Elsevier, vol. 70(1), pages 39-68, January.
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Citations

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Cited by:
  1. Jean-Thomas Bernard & Michael Gavin & Lynda Khalaf & Marcel Voia, 2011. "The Environmental Kuznets Curve: Tipping Points, Uncertainty and Weak Identification," Cahiers de recherche CREATE 2011-4, CREATE.
  2. J.G. Hirschberg & J. N. Lye, 2007. "Providing Intuition to the Fieller Method with Two Geometric Representations using STATA and Eviews," Department of Economics - Working Papers Series 992, The University of Melbourne.
  3. Bernard, Jean-Thomas & Idoudi, Nadhem & Khalaf, Lynda & Yelou, Clement, 2007. "Finite sample multivariate structural change tests with application to energy demand models," Journal of Econometrics, Elsevier, vol. 141(2), pages 1219-1244, December.
  4. J. G. Hirschberg, J. N. Lye & D. J. Slottje, 2008. "Confidence Intervals for Estimates of Elasticities," Department of Economics - Working Papers Series 1053, The University of Melbourne.
  5. Hirschberg, J.G. & Lye, J.N. & Slottje, D.J., 2008. "Inferential methods for elasticity estimates," Journal of Econometrics, Elsevier, vol. 147(2), pages 299-315, December.

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