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Demand for electricity: evidence of cointegration and causality from Sri Lanka

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  • Wasantha Athukorala

    ()
    (QUT)

  • Clevo Wilson

    ()
    (QUT)

Abstract

This study examines the cointegration and causality relationship between the demand for residential electricity and real income, average real electricity prices, real kerosene prices and real gas prices using annual data for the period, 1960-2007 in Sri Lanka. Error correction (EC) techniques and the Granger-causality (GC) approaches are employed. The long run income elasticity of demand, price elasticity of demand and kerosene price were estimated to be 0.78, -0.62, and 0.14 respectively. The short run elasticities for the same variables were 0.32, -0.16 and 0.10 respectively. The GC results detect bi-directional causality between electricity consumption and real income as well as electricity prices and its consumption. This suggests that these variables are determined jointly. Furthermore, one-way causality running from kerosene price to electricity demand was also found.

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File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2010/WP258.pdf
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Bibliographic Info

Paper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 258.

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Length: 19 pages
Date of creation: 30 Jul 2010
Date of revision:
Handle: RePEc:qut:dpaper:258

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Keywords: Electricity demand; causality; cointegration analysis;

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  1. Xiaohua, Wang & Zhenmin, Feng, 2001. "Rural household energy consumption with the economic development in China: stages and characteristic indices," Energy Policy, Elsevier, vol. 29(15), pages 1391-1397, December.
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