Energy Price- and Income-Elasticities of Demand: Some Estimates for the UK Using the Cointegration Procedure.

The aim of this paper is to reexamine aggregate energy demand in the United Kingdom using the relatively recent procedure of cointegration. It shows energy consumption, the real price of energy, and real GDP cointegrate, which implies the existence of a long-run equilibrium. The associated long-run price-elasticity estimate is about -0.3 and the long-run income-elasticity estimate is about 0.5. The associated dynamic error-correction model yields short-run price- and income-elasticities of -0.1 and 0.6, respectively. Copyright 1989 by Scottish Economic Society.