Econometric Analysis of Gasoil Demand in Road Transportation Subsector- A Comparison of Cointegration and STSM Approaches.

Hamid Amadeh,Assistant Professor, Faculty of Economics, Allame Tabatab’i University,amadeh@gmail.com

Received: 2012/07/18  Accepted: 2013/06/16

Abstract

Subsidized energy carriers’ prices has lead to increasing demand for them specially in transport sector. Due to enforcement of targeting subsidies plan, price of energy carriers and also gasoil price will increase. Economic analysis of this increase need to modeling energy consumption reaction to price changes. In this paper gasoil demand function has been estimated for Iranian road transport subsector. For modeling the gasoil demand function Engle-Granger, Johansen and ARDL cointegration approaches and structural time series modeling (STSM) has been used. Results showed that gasoil demand is price inelastic. Price and Income elasticities of gasoil demand has been estimated -0.5 and 0.93 respectively. Estimated elasticities throught different techniques are not very different. Besides STSM results showed that gasoil underlying demand trend isn’t stochastic and estimated elasticities by STSM are lower than cointegration approaches. Because gasoil demand is price inelastic, in order to reducing gasoil demand, relying on price policies would not be effective.

JEL Classification: C22, Q41

Keywords: Cointegration, Price Elasticity, Gasoil, Road Transport, ARDL, STSM.