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An estimation of U.S. gasoline demand in the short and long run
Södertörn University, School of Social Sciences.
2011 (English)Independent thesis Advanced level (degree of Master (One Year)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

The rapid growth of gasoline consumption in the USA for the last decades brings much concern to scientists and politicians. Therefore many researchers investigated the influence of the main factors that have an impact on gasoline demand. In our study we tried to estimate gasoline demand in the USA, using national time series data for the period 1984-2010. Gasoline demand function considered in this paper includes price, income, fuel efficiency and gasoline consumption in previous year, as the main explanatory variables. The model is estimated using simultaneous equations and cointegration and error correction model (ECM). The results of both methods show a significant price and income effect on gasoline demand. The price is found inelastic and its impact on gasoline demand is very small, however when we correct for endogeneity of price variable, we obtain higher price elasticity. The results on income elasticities obtained from two methods are dubious, since the two methods gave us the different results. In whole, an income raise will lead to an increase of consumption, gasoline demand is inelastic with respect to income in the short-run, while in the long-run it is found to be elastic according to 2SLS method, while the results of cointegration method indicate that gasoline response to income changes is higher in the short-run than in the long-run. Lag of error term suggests that around 57% of adjustment between short-run and long-run occurs during the first year. 

Place, publisher, year, edition, pages
2011. , p. 71
Keyword [en]
gasoline demand, price and income elasticities, short-run, long-run, 2SLS, cointegration
National Category
Economics
Identifiers
URN: urn:nbn:se:sh:diva-15010OAI: oai:DiVA.org:sh-15010DiVA, id: diva2:483738
Subject / course
Economics
Presentation
2012-01-20, 14:32 (English)
Uppsok
Social and Behavioural Science, Law
Supervisors
Examiners
Available from: 2012-01-26 Created: 2012-01-25 Last updated: 2012-01-26Bibliographically approved

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Estimation of gasoline demand in the USA(1429 kB)324 downloads
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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf