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The Dilemma of Economic Versus Statistical Models of Energy

The recent surge of interest among energy planners in economic models' for predicting the energy outlook has coincided with a growing senseof disillusionment among many practicing econometricians about the forecasting performance of economic models (see, for example, Stekler, 1968).Many economists argue that the problem with economic models lies in the economic theories behind them. These theories analyze the impact of policy changes on the assumption that the structure will not change, when in fact what may happen is that the structure itself, and not just the variables ofinterest, may change as policy changes. What is needed is a theory that predicts how the structure will change in response to such policy changes.

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Energy Specializations: Energy Modeling – Energy Data, Modeling, and Policy Analysis

JEL Codes: Q40: Energy: General, Q42: Alternative Energy Sources, C53: Forecasting Models; Simulation Methods, C58: Financial Econometrics, Q54: Climate; Natural Disasters and Their Management; Global Warming

Keywords: Peak electricity demand, Forecasting, Transfer function model

DOI: 10.5547/ISSN0195-6574-EJ-Vol2-No3-10

Published in Volume 2, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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