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Modeling Gasoline Demand with Structural Breaks:New Evidence from Nigeria

Author

Listed:
  • Olusegun A. Omisakin

    (Department of Economics and Business Studies, Redeemer’s University, Nigeria)

  • Abimbola M. Oyinlola

    (Department of Economics, University of Ibadan, Nigeria)

  • Oluwatosin A. Adeniyi

    (Department of Economics and Business Studies, Redeemer’s University, Nigeria)

Abstract

This paper extends previous studies in modeling and estimating demand for gasoline for Nigeria from 1977 to 2008. The ingenious attempt of this study, contrast to earlier studies on Nigeria and other developing countries, lies in its assumption of structural breaks in the long run relationship among the variables employed. The study tests for the possibility of structural breaks/regime shifts and parameter instability in the gasoline demand function in Nigeria using more recent and robust techniques. While the conventional residual-based cointegration tests employed fail to identify any meaningful long-run relationship in the gasoline function, the Gregory-Hansen structural break cointegration approach confirms the cointegration relationships despite the breakpoints. The elasticity estimates also follow the a priori expectations being inelastic both in the long- and short-run for both price and income. Having identified plausible breaks in the systems, the test does suggest that a structural break in the cointegration vector is important and needs to be taken care of in the specification of gasoline demand functions in Nigeria. It is envisaged, therefore, that substantial policy lessons would be drawn from the findings of this study especially in the current phase of energy industry deregulation in Nigeria.

Suggested Citation

  • Olusegun A. Omisakin & Abimbola M. Oyinlola & Oluwatosin A. Adeniyi, 2012. "Modeling Gasoline Demand with Structural Breaks:New Evidence from Nigeria," International Journal of Energy Economics and Policy, Econjournals, vol. 2(1), pages 1-9.
  • Handle: RePEc:eco:journ2:2012-01-1
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Aliyu Barde Abdullahi, 2014. "Modeling Petroleum Product Demand in Nigeria Using Structural Time Series Model (STSM) Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 4(3), pages 427-441.
    2. Tajudeen, Ibrahim A., 2015. "Examining the role of energy efficiency and non-economic factors in energy demand and CO2 emissions in Nigeria: Policy implications," Energy Policy, Elsevier, vol. 86(C), pages 338-350.

    More about this item

    Keywords

    Gasoline demand modeling; Structural breaks; Parameter stability; Cointegration;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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