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

Author

Listed:
  • 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.

Suggested Citation

  • Wasantha Athukorala & Clevo Wilson, 2010. "Demand for electricity: evidence of cointegration and causality from Sri Lanka," School of Economics and Finance Discussion Papers and Working Papers Series 258, School of Economics and Finance, Queensland University of Technology.
  • Handle: RePEc:qut:dpaper:258
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    File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2010/WP258.pdf
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    References listed on IDEAS

    as
    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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Electricity demand; causality; cointegration analysis;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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