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Electricity consumption-GDP nexus: A structural time series analysis

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  • Muhammad, Javid
  • Abdul, Qayyum

Abstract

This study investigates the relationships among electricity consumption, real economic activity, real price of electricity and the underlying energy demand trend UEDT at the aggregate and sectoral levels, namely, for the residential, commercial, industrial, and agricultural sectors. To achieve this goal, an electricity demand function for Pakistan is estimated by applying the structural time series technique to annual data for the period from 1972 to 2010. In addition to identifying the size and significance of the price and income elasticities, this technique also uncovers UEDT for the whole economy as well as for sub-sectors. The results suggest that the nature of the trend is not linear and deterministic but stochastic in form. The UEDT for the electricity usage of the commercial, agricultural and residential sectors shows an upward slope. This upward slope of the UEDT suggests that either energy efficient equipment has not been introduced in these sectors or any energy efficiency improvements due to technical progress is outweighed by other exogenous factors.

Suggested Citation

  • Muhammad, Javid & Abdul, Qayyum, 2013. "Electricity consumption-GDP nexus: A structural time series analysis," MPRA Paper 47448, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:47448
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    References listed on IDEAS

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    Cited by:

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    2. Kargi, Bilal, 2014. "Electricity Consumption and Economic Growth: Long-Term Co-Integrated Analysis on Turkey," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 6(4), pages 285-293.
    3. SHIRANI-FAKHR, Zohreh & KHOSHAKHLAGH, Rahman & SHARIFI, Alimorad, 2015. "Estimating Demand Function For Electricity In Industrial Sector Of Iran Using Structural Time Series Model (Stsm)," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 15(1), pages 143-160.
    4. Adewuyi, Adeolu O. & Adeniyi, Oluwatosin, 2015. "Trade and consumption of energy varieties: Empirical analysis of selected West Africa economies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 47(C), pages 354-366.
    5. Syed Zakir Abbas ZAIDI*, 2017. "Determinants Of Stocks For Optimal Portfolio," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 27(1), pages 1-27.
    6. Qudrat-Ullah, Hassan, 2015. "Independent power (or pollution) producers? Electricity reforms and IPPs in Pakistan," Energy, Elsevier, vol. 83(C), pages 240-251.
    7. Rahman, Md. Saifur & Noman, Abu Hanifa Md. & Shahari, Farihana & Aslam, Mohamed & Gee, Chan Sok & Isa, Che Ruhana & Pervin, Sajeda, 2016. "Efficient energy consumption in industrial sectors and its effect on environment: A comparative analysis between G8 and Southeast Asian emerging economies," Energy, Elsevier, vol. 97(C), pages 82-89.
    8. Atalla, Tarek N. & Hunt, Lester C., 2016. "Modelling residential electricity demand in the GCC countries," Energy Economics, Elsevier, vol. 59(C), pages 149-158.

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    More about this item

    Keywords

    Electricity; STSM; UEDT;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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