Structural Breaks, Parameter Stability and Energy Demand Modeling in Nigeria

International Journal of Economic Sciences and Applied Research, Volume 5 Issue 2, pp. 129-144

16 Pages Posted: 4 Oct 2012

See all articles by Dr. Olusegun A. Omisakin

Dr. Olusegun A. Omisakin

The Nigerian Economic Summit Group (NESG)

Oluwatosin Ademola Adeniyi

Centre for the Study of the Economies of Africa

Abimbola Oyinlola

affiliation not provided to SSRN

Date Written: October 2, 2012

Abstract

This paper extends previous studies in modeling and estimating energy demand functions for both gasoline and kerosene petroleum products for Nigeria from 1977 to 2008. In contrast to earlier studies on Nigeria and other developing countries, this study specifically tests for the possibility of structural breaks/regime shifts and parameter instability in the energy demand functions using more recent and robust techniques. In addition, the study considers an alternative model specification which primarily captures the price-income interaction effects on both gasoline and kerosene demand functions. While the conventional residual-based cointegration tests employed fail to identify any meaningful long run relationship in both functions, the Gregory-Hansen structural break cointegration approach confirms the cointegration relationships despite the breakpoints. Both functions are also found to be stable under the period studied. The elasticity estimates also follow the a priori expectation being inelastic both in the long and short run for the two functions.

Keywords: energy demand modeling, structural breaks, parameter stability, cointegration

JEL Classification: C13, C22, C51

Suggested Citation

Omisakin, Olusegun A. and Adeniyi, Oluwatosin Ademola and Oyinlola, Abimbola, Structural Breaks, Parameter Stability and Energy Demand Modeling in Nigeria (October 2, 2012). International Journal of Economic Sciences and Applied Research, Volume 5 Issue 2, pp. 129-144. Available at SSRN: https://ssrn.com/abstract=2155626

Olusegun A. Omisakin (Contact Author)

The Nigerian Economic Summit Group (NESG) ( email )

6, Summit House, Oba Elegushi Close,
Ikoyi, Lagos
Lagos, 234
Nigeria
+2347088306162 (Phone)

HOME PAGE: http://www.nesgroup.org

Oluwatosin Ademola Adeniyi

Centre for the Study of the Economies of Africa ( email )

Abimbola Oyinlola

affiliation not provided to SSRN

No Address Available

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