ARMAX modelling of international tourism demand

Box–Jenkins (1970) models are often used to capture the autoregressive moving average of past observations of tourist arrivals from Japan to Taiwan and New Zealand. However, other explanatory variables, such as real income in the origin country, have also affected the demand for international travel. The purpose of this paper is to use the ARMAX model to investigate the dynamic relationship between tourism demand and real income of Japan, and to compare the findings with the single-equation model. Unit root tests and diagnostics are performed before estimating the income elasticity of travel demand by Japan for New Zealand and Taiwan based on seasonally unadjusted quarterly data for 1980(1) to 2004(2). The empirical results of the ARMAX model support the economic theory that the demand for international travel is positively related to income of the origin country.     

Electricity consumption in G7 countries: A panel cointegration analysis of residential demand elasticities

This article applies recently developed panel unit root and panel cointegration techniques to estimate the long-run and short-run income and price elasticities for residential demand for electricity in G7 countries. The panel results indicate that in the long-run residential demand for electricity is price elastic and income inelastic. The study concludes that from an environmental perspective there is potential to use pricing policies in the G7 countries to curtail residential electricity demand, and thus curb carbon emissions, in the long run.     

“Key” sectors in final energy consumption: an input–output application to the Spanish case

In this paper we analyze the determination of “key” sectors in the final energy consumption. We approach this issue from an input–output perspective and we design a methodology based on the elasticities of the demands of final energy consumption. As an exercise, we apply the proposed methodology to the Spanish economy. The analysis allows us to indicate the greater or lesser relevance of the different sectors in the consumption of final energy, pointing out which sectors deserve greater attention in the Spanish case and showing the implications for energy policy.     

Short and long-run elasticities in US residential electricity demand: a co-integration approach

Co-integration techniques show promise in the analysis of short- and long-run effects of economic variables on energy use. We use these techniques to develop an error correction model of annual US residential electricity demand. We construct equipment stock indices and estimate the model for 1949–1993. Our analysis suggests a structural shift in consumption during the 1960s. We discuss reasons for this shift, report the short- and long-run elasticities, provide forecasts for 1994–1995, and compare the model's forecasts with other published forecasts.     

World transport energy demand modelling : Methodology and elasticities

This paper presents the International Energy Agency's (IEA) approach of modelling transport energy demand. Fuel demand, which is not a demand per se, is derived, whenever possible, from the economic activity in the transport sector and not estimated directly, ie using one equation or (simultaneous) equation system. In general, the transport models employ a ‘two-step-approach’: in the first step, transport activity, the sector's relevant energy service, is estimated econometrically. In the second step, the transport activity projections are then combined with estimates of efficiency improvements, car turnover rates and diesel/gasoline penetration assumptions in order to arrive at projections of fuel demand. The principal advantages of this approach are that the relevant energy services are modelled and that, for model simulation, efficiency improvements can be dealt with explicitly. The effectiveness of economic instruments is a function of the reaction of consumers (and businesses) to income and price changes. An in-depth understanding of income and price elasticities of transport demand and transport energy demand is important in order to be able to assess the effectiveness of policies considered. The paper also shows the underlying long-term income and price elasticities for OECD and non-OECD regions.     

Natural gas price elasticities: Variations by region and by sector in the USA

This article's primary objective is to estimate the own-price and cross-price elasticities of demand for natural gas in the residential, commercial and industrial sectors by DOE region in the USA. A simultaneous-equations model was developed and its reduced form was employed for natural gas consumption demand elasticity estimation in conjuction with the instrumental price variables. Data from 1967 to 1978 were used in the estimation, but the 1973 oil embargo effect was separated with the use of a dummy variable. The demand for natural gas was much more price elastic in the long run than in the short run, and the industrial sector was more less price sensitive than others. However, there were significant interregional and intersectoral variations among the elasticities estimated.     

Modelling energy and non-energy substitution: A brief survey of elasticities

Estimating the degree of substitution between energy and non-energy inputs is the key for any evaluation of environmental and energy policies. Yet, given the variety of substitution elasticities, the central question arises as to which measure would be most appropriate. Apparently, Allen's elasticities of substitution have been the most-used measures in applied production analysis. In line with Frondel (2004), this paper argues that cross-price elasticities are preferable for many practical purposes. This conclusion is based on a survey of classical substitution measures, such as those from Allen, Morishima, and McFadden. The survey highlights the fact that cross-price elasticities are their essential ingredients.     

Longitudinal working models: Estimates of household energy consumption in Australia

The paper uses household expenditure survey data and alternative functional specifications of Engel's laws to establish an empirical pattern of disaggregate energy (ie electricity, gas, other fuels and gasoline) demand characterized by different demographic attributes for use in a combined panel data model of energy consumption and impact in Australia. The findings lend support, in terms of statistical efficiency and economic–theoretic plausibility, to the dominance of the Working form over the conventional linear Allen–Bowley function. Energy as a whole is a necessity while at the disaggregate level gasoline is considered a luxury. The findings indicate in this respect the existence of demand elasticity bias in aggregate energy models.     

Optimal real time pricing in an agent-based retail market using a comprehensive demand response model

In this paper, a weighted combination of different demand vs. price functions referred to as Composite Demand Function (CDF) is introduced in order to represent the demand model of consuming sectors which comprise different clusters of customers with divergent load profiles and energy use habitudes. Derived from the mathematical representations of demand, dynamic price elasticities are proposed to demonstrate the customers’ demand sensitivity with respect to the hourly price. Based on the proposed CDF and dynamic elasticities, a comprehensive demand response (CDR) model is developed in this paper for the purpose of representing customer response to time-based and incentive-based demand response (DR) programs. The above model helps a Retail Energy Provider (REP) agent in an agent-based retail environment to offer day-ahead real time prices to its customers. The most beneficial real time prices are determined through an economically optimized manner represented by REP agent’s learning capability based on the principles of Q-learning method incorporating different aspects of the problem such as price caps and customer response to real time pricing as a time-based demand response program represented by the CDR model. Numerical studies are conducted based on New England day-ahead market’s data to investigate the performance of the proposed model.     

Residential energy demand in the United States: Analysis using static and dynamic approaches

The residential sector is the main consumer of energy in the United States, and reducing energy consumption is an important goal for policymakers in each state. To know how reducing residential energy demand could be achieved, this study develops a set of static and dynamic models to investigate and identify the impact of socio-economic and demographic characteristics, building age, energy prices, and weather conditions on residential energy demand at the state level from 2005 to 2013. Next, this study proposes two alternative scenarios to reduce residential energy demand based on the most precise model. For every 10,000 dollars of per capita income in each state: (1) increasing residential electricity price by 1 cent per kW h and (2) decreasing average building age by 1%. In the first scenario, the findings indicate that annual residential electricity demand would decrease by 7.3% on average, with the highest reductions in Washington (11.9%), North Dakota (10.9%), and Idaho (9.7%). In the second scenario, residential gas demand would decrease by an average of 15.8% annually, with the highest reduction in Connecticut (33.2%) followed by New York (33.0%) and Massachusetts (30.7%). These proposed scenarios assist policymakers in optimizing decisions and investments to reduce residential energy consumption.