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Residential Natural Gas Demand in Illinois: Evidence from the ARDL Bounds Testing Approach

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  • Payne, James E.
  • Loomis, David G.
  • Wilson, Renardo

Abstract

This study estimates the demand for residential natural gas in the state of Illinois using an autoregressive distributed lag (ARDL) bounds testing approach based on annual data from 1970 to 2007. The ARDL bounds testing approach reveals a long-run equilibrium relationship between natural gas consumption per capita and real residential natural gas prices, real personal disposable income per capita, real residential electricity prices, real fuel oil prices, and heating degree days. Long-run elasticity estimates show that only real residential natural gas prices, real residential electricity prices, and heating degree days are statistically significant. The results from the corresponding error correction model indicate that only real residential natural gas prices and heating degree days are statistically significant. While the long-run elasticity estimates are larger than the short-run elasticity estimates, both the short-run and long-run elasticity estimates are less than one in absolute terms. Furthermore, the speed of adjustment towards long-run equilibrium is approximately 1.42 years.

Suggested Citation

  • Payne, James E. & Loomis, David G. & Wilson, Renardo, 2011. "Residential Natural Gas Demand in Illinois: Evidence from the ARDL Bounds Testing Approach," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 41(2), pages 1-10.
    • Handle: RePEc:ags:jrapmc:133345
    DOI: 10.22004/ag.econ.133345
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    2. Ju-Hee Kim & Byoung-Soh Hwang & Seung-Hoon Yoo, 2022. "Estimating the Demand Function for Residential City Gas in South Korea: Findings from a Price Sensitivity Measurement Experiment," Sustainability, MDPI, vol. 14(12), pages 1-13, June.
    3. Malzi, Mohamed Jaouad & Sohag, Kazi & Vasbieva, Dinara G. & Ettahir, Aziz, 2020. "Environmental policy effectiveness on residential natural gas use in OECD countries," Resources Policy, Elsevier, vol. 66(C).
    4. Fullerton Jr., Thomas M. & Macias, David R. & Walke, Adam G., 2016. "Residential Electricity Demand in El Paso," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 46(2), December.
    5. Halim Tatli, 2019. "Factors affecting industrial coal demand in Turkey," Energy & Environment, , vol. 30(6), pages 1027-1048, September.
    6. Ishmael Ackah, 2014. "Determinants of natural gas demand in Ghana," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 38(3), pages 272-295, September.
    7. Kani, Alireza H. & Abbasspour, Madjid & Abedi, Zahra, 2014. "Estimation of demand function for natural gas in Iran: Evidences based on smooth transition regression models," Economic Modelling, Elsevier, vol. 36(C), pages 341-347.
    8. Khan, Muhammad Arshad, 2015. "Modelling and forecasting the demand for natural gas in Pakistan," Renewable and Sustainable Energy Reviews, Elsevier, vol. 49(C), pages 1145-1159.
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    10. Jumah Ahmad Alzyadat, 2022. "The Price and Income Elasticity of Demand for Natural Gas Consumption in Saudi Arabia," International Journal of Energy Economics and Policy, Econjournals, vol. 12(6), pages 357-363, November.
    11. Burke, Paul J. & Yang, Hewen, 2016. "The price and income elasticities of natural gas demand: International evidence," Energy Economics, Elsevier, vol. 59(C), pages 466-474.
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