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Interfuel substitution: A copula approach

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  • Serletis, Apostolos
  • Xu, Libo

Abstract

We investigate interfuel substitution using the Minflex Laurent flexible demand system and a more flexible copula estimation approach. In doing so, we relax the joint normality assumption of the errors of the demand system and estimate the model without having to delete one equation as is usually the practice under the assumption of jointly normally distributed errors. The results indicate that the short-run Morishima elasticities of substitution among crude oil, natural gas, and coal are small, implying that one fuel has hardly utilized to substitute for another fuel.

Suggested Citation

  • Serletis, Apostolos & Xu, Libo, 2022. "Interfuel substitution: A copula approach," Journal of Commodity Markets, Elsevier, vol. 28(C).
    • Handle: RePEc:eee:jocoma:v:28:y:2022:i:c:s2405851322000058
    DOI: 10.1016/j.jcomm.2022.100247
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    More about this item

    Keywords

    Minflex laurent model; Demand for energy;

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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