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Modeling of Electricity Demand for Azerbaijan: Time-Varying Coefficient Cointegration Approach

Author

Listed:
  • Jeyhun I. Mikayilov

    (King Abdullah Petroleum Studies and Research Center, PO Box 88550, Riyadh 11672, Saudi Arabia
    Department of Statistics, Azerbaijan State University of Economics (UNEC), Istiqlaliyyat Str. 6, Baku AZ1141, Azerbaijan
    Institute for Scientific Research on Economic Reforms, 88a, Hasan Bey Zardabi Avenue, Baku AZ1011, Azerbaijan)

  • Fakhri J. Hasanov

    (King Abdullah Petroleum Studies and Research Center, PO Box 88550, Riyadh 11672, Saudi Arabia
    Research Program on Forecasting, Economics Department, The George Washington University, 2115 G Street, NW, Washington, DC 20052, USA
    Institute of Control Systems, Azerbaijan National Academy of Sciences, B. Vahabzade Street 9, Baku AZ1141, Azerbaijan)

  • Carlo A. Bollino

    (King Abdullah Petroleum Studies and Research Center, PO Box 88550, Riyadh 11672, Saudi Arabia
    Department of Economics, University of Perugia, Via Pascoli 20, 06123 Perugia, Italy)

  • Ceyhun Mahmudlu

    (Department of International Relations, Baku Engineering University, Hasan Aliyev 120, Khirdalan AZ0101, Azerbaijan)

Abstract

Recent literature has shown that electricity demand elasticities may not be constant over time and this has investigated using time-varying estimation methods. As accurate modeling of electricity demand is very important in Azerbaijan, which is a transitional country facing significant change in its economic outlook, we analyze whether the response of electricity demand to income and price is varying over time in this economy. We employed the Time-Varying Coefficient cointegration approach, a cutting-edge time-varying estimation method. We find evidence that income elasticity demonstrates sizeable variation for the period of investigation ranging from 0.48% to 0.56%. The study has some useful policy implications related to the income and price aspects of the electricity consumption in Azerbaijan.

Suggested Citation

  • Jeyhun I. Mikayilov & Fakhri J. Hasanov & Carlo A. Bollino & Ceyhun Mahmudlu, 2017. "Modeling of Electricity Demand for Azerbaijan: Time-Varying Coefficient Cointegration Approach," Energies, MDPI, vol. 10(11), pages 1-12, November.
    • Handle: RePEc:gam:jeners:v:10:y:2017:i:11:p:1918-:d:119727
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    3. Jeyhun I. Mikayilov & Fakhri J. Hasanov & Marzio Galeotti, 2018. "Decoupling of C02 Emissions and GDP: A Time-Varying Cointegration Approach," IEFE Working Papers 101, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
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    5. Shahriyar Mukhtarov & Jeyhun I. Mikayilov & Jeyhun Mammadov & Elvin Mammadov, 2018. "The Impact of Financial Development on Energy Consumption: Evidence from an Oil-Rich Economy," Energies, MDPI, vol. 11(6), pages 1-14, June.
    6. Liddle, Brantley & Smyth, Russell & Zhang, Xibin, 2020. "Time-varying income and price elasticities for energy demand: Evidence from a middle-income panel," Energy Economics, Elsevier, vol. 86(C).
    7. Masike, Kabelo & Vermeulen, Cobus, 2022. "The time-varying elasticity of South African electricity demand," Energy, Elsevier, vol. 238(PC).
    8. Jeyhun Mikayilov & Fred Joutz & Fakhri Hasanov, 2019. "Gasoline Demand in Saudi Arabia: Are the Price and Income Elasticities Constant?," Discussion Papers ks--2019-dp81, King Abdullah Petroleum Studies and Research Center.

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