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Paper Information

Journal:   IRANIAN JOURNAL OF TRADE STUDIES (IJTS)   SPRING 2007 , Volume 11 , Number 42; Page(s) 29 To 52.
 
Paper: 

ESTIMATION OF ERROR CORRECTION MODEL OF DEMAND FOR GASOLINE IN IRAN

 
 
Author(s):  ZARRA NEZHAD M., GHAPANCHI F.
 
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Abstract: 

Ever increasing and mismanagement of gasoline consumption in Iran has caused deficiency in gasoline production, so that the country has confronted with problems in providing this product and has been obliged to import it. Therefore, estimating the demand function for gasoline and studying the factors affecting gasoline consumption are very important. The period of this research is 1967-2003. In this research by using the cointegration method of Johansen-Juselius, the long-term relationship and the error correction model, which specifies the system's short-term dynamics, have been estimated. The results show that the demand for gasoline is inelastic with respect to its price and income; it means that gasoline is an essential goods. Therefore, nonprice and nonincome factors have a particular impact on gasoline consumption. The error correction coefficient, which determines the speed of adjustment, has an expected and significant negative sign. The results indicate that deviation from the long-term gasoline consumption is corrected by approximately 51 percent in the following year.

 
Keyword(s): DEMAND FUNCTION, GASOLINE, COINTEGRATION, JOHANSEN, ERROR CORRECTION MODEL, ELASTICITY OF DEMAND, ELASTICITY OF INCOME, IRAN
 
References: 
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