Petrol, Diesel Fuel and Jet Fuel Demand in South Africa: 1998-2009
Willem H. Boshoff
Stellenbosch University - Department of Economics
August 18, 2010
We employ the autoregressive distributed lag (ARDL) model and the automated general-to-specific approach to re-estimate price and income elasticity for petrol and, for the first time, diesel and jet fuel, in South Africa. By using a quarterly dataset, we build adequate and parsimonious econometric models for the 1998-2009 period, avoiding the problem of structural breaks in longer sample periods – an issue which previous studies built on annual data ignore. Our price elasticity estimates for petrol demand is consistent with previous South African research, but we find income elasticity to be significantly higher than previously estimated. Diesel and jet fuel demand exhibits low price elasticity and very high income elasticity. Finally, the speed with which demand respond to long-run disequilibria is found to be much slower for petrol than for either diesel fuel or jet fuel.
Number of Pages in PDF File: 19
Keywords: petrol demand, diesel, jet fuel, petrol, South Africa, bounds test
JEL Classification: C22, C52, C53, R41working papers series
Date posted: August 20, 2010
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