Does oil price uncertainty affect energy use?
AbstractTheory predicts that the presence of fixed costs affects the relationship between energy use and energy price changes, as the firm's output and investment decisions respond differently to energy price increases and decreases. The asymmetry in response to energy price changes is exacerbated by uncertainty with respect to future energy prices, but to date the empirical literature does not explicitly take uncertainty into account. The contribution of this paper is twofold. First, we develop a new measure of energy price uncertainty. Second, we apply the measure to explain energy use in 8 OECD countries between 1978 and 1996, trying to identify whether indeed energy price uncertainty effects the asymmetry resulting from changes in energy use.
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Bibliographic InfoPaper provided by University of Groningen, CCSO Centre for Economic Research in its series CCSO Working Papers with number 200306.
Date of creation: 2003
Date of revision:
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- F0 - International Economics - - General
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9911, Federal Reserve Bank of Dallas.
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