Directional causality in the demand for electrical energy in the United States |
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Authors: | Noel D. Uri |
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Affiliation: | Office of Energy Use Analysis, Energy Use Technologies Division, U.S. Department of Energy, Washington, DC 20461 U.S.A. |
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Abstract: | The majority of the studies on the demand for electrical energy have been done with single-equation models. In this paper it is demonstrated that not only is the quantity of electrical energy demanded a function of price, but price is related causally to quantity in the residential sector. The significance of this is that it is not sufficient to estimate single-equation models. Since bidirectional causality cannot be statistically rejected, any estimation of the demand for electrical energy must be done in a system of simultaneous equations to avoid specification errors and the associated problems. |
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