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Asymmetry in the Residential Demand for Electricity

Trevor Young, Thomas H. Stevens, and Cleve Willis

Year: 1983
Volume: Volume 4
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol4-NoSI-10
No Abstract



Imperfect Price-Reversibility of U.S. Gasoline Demand: Asymmetric Responses to Price Increases and Declines

Dermot Gately

Year: 1992
Volume: Volume 13
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No4-10
View Abstract

Abstract:
This paper describes a framework for analyzing the imperfect pricereversibility ("hysteresis") of oil demand. The oil demand reductions following the oil price increases of the 1970s will not be completely reversed by the price cuts of the 1980s, nor is it necessarily true that these partial demand reversals themselves will be reversed exactly by future price increases. We decompose price into three monotonic series: price increases to maximum historic levels, price cuts, and price recoveries (increases below historic highs). We would expect that the response to price cuts wouldbe no greater than to price recoveries, which in turn would be no greater than for increases in maximum historic price. For evidence of imperfect price-reversibility, we test econometrically the following U.S. data: vehicle miles per driver,the fuel efficiency of the automobile fleet, and gasoline demand per driver. In each case, our econometric results allow us to reject the hypothesis of perfect price-reversibility. The data show smaller response to price cuts than to priceincreases.This has dramatic implications for projections of gasoline and oil demand, especially under low-price assumptions.



OECD Oil Demand Dynamics: Trends and Asymmetries

William W. Hogan

Year: 1993
Volume: Volume 14
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No1-6
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Abstract:
Oil market data of the 1980s reject a simple, symmetric reduced-form model of dynamic oil demand in the OECD countries. Tests of price asymmetric long-run demand models produce ambiguous results. The pooled time series estimations find near unitary output elasticities, and reject linear demand models in favor of constant elasticity formulations. Despite large differences in product prices and crude prices, the data cannot reject use of a crude price model fir aggregate oil demand. A reduced-form model symmetric in product prices but with technology trends for non-price oil conservation compares favorably with other formulations, and provides slightly lower projections of future oil demand intensity. However, even these lower econometric projections imply substantial increases in aggregate oil demand, increases which exceed those found in the conventional judgmental estimates.



Oil Prices and Economic Activity: Is the Relationship Symmetric?

Javier F. Mory

Year: 1993
Volume: Volume14
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No4-10
View Abstract

Abstract:
This paper presents some evidence of an asymmetric effect of oil price spikes upon the U.S. economy. It appears that price increases may be associated with reductions in economic activities, while price decreases do not display a distinct relationship with the economy.Possible explanations for these results are offered.



Business Cycles and the Oil Market

Knut Anton Mork

Year: 1994
Volume: Volume 15
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-NoSI-3
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Abstract:
The last twenty years have seen a number of oil-price changes with macroeconomic effects. Oil price increases spur inflation and produce recessions. Oil price declines dampen inflation, but do not necessarily boost real activity. The correlations can be traced back to World War II. The paper gives a survey of oil market events with macroeconomic consequences. It also discusses hypotheses about the nature of the link and efforts to incorporate oil in macroeconomic models. Business cycle research has recently advanced sectoral imbalance and uncertainty as leading hypotheses to explain the apparent asymmetry in the macroeconomic effects of oil price changes.



Crude Oil Prices and U.S. Economic Performance: Where Does the Asymmetry Reside?

Hillard G. Huntington

Year: 1998
Volume: Volume19
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No4-5
View Abstract

Abstract:
Sustained decreases in crude oil prices appear to affect the U.S. economy differently than sustained increases. This paper shows that a significant part of the observed asymmetry is due to adjustments within the energy sector and not within the rest of the economy. In particular, sustained decreases in petroleum product or general energy prices do not appear to have qualitatively different macroeconomic impacts than do sustained price increases. The singular focus on crude oil price changes in previous studies is misplaced. Moreover, the 1986 oil price collapse did not operate in isolation from other important events. As crude oil prices fell in the 1986 period, other factors caused a major devaluation of the U.S. dollar that had potentially important effects on the U.S. economy.



The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand

Dermot Gately and Hiliard G. Huntington

Year: 2002
Volume: Volume23
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol23-No1-2
View Abstract

Abstract:
This paper estimates the effects on energy and oil demand of changes in income and oil prices, for 96 of the world's largest countries, in per-capita terms. We examine three important issues: the asymmetric effects on demand of increases and decreases in oil prices; the asymmetric effects on demand of increases and decreases in income; and the different speeds of demand adjustment to changes in price and in income. Our main conclusions are the following: (1) OECD demand responds much more to increases in oil prices than to decreases; ignoring this asymmetric price response will bias downward the estimated response to income changes; (2) demand's response to income decreases in many Non-OECD countries is not necessarily symmetric to its response to income increases; ignoring this asymmetric income response will bias the estimated response to income changes; (3) the speed of demand adjustment is faster to changes in income than to changes in price; ignoring this difference will bias upward the estimated response to income changes. Using correctly specified equations for energy and oil demand, the longrun response in demand for income growth is about 1.0 for Non-OECD Oil Exporters, Income Growers and perhaps all Non-OECD countries, and about 0.55 For OECD countries. These estimates for developing countries are significantly higher than current estimates used by the US Department of Energy. Our estimates for the OECD countries are also higher than those estimated recently by Schmalensee-Stoker-Judson (1998) and Holtz-Eakin and Selden (1995), who ignore the (asymmetric) effects of prices on demand. Higher responses to income changes, of course, will increase projections of energy and oil demand, and of carbon dioxide emissions.



Oil Price Shocks and the U.S. Economy: Where Does the Asymmetry Originate?

Nathan S. Balke, Stephen P.A. Brown and Mine K. Yucel

Year: 2002
Volume: Volume23
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol23-No3-2
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Abstract:
Rising oil prices appear to retard aggregate U.S. economic activity by more than falling oil prices stimulate it. Past research suggests adjustment costs, financial stress, and/or monetary policy may be possible explanations for the asymmetric response. This paper uses a near vector autoregressive model of the U.S. economy to examine where the asymmetry might originate. The analysis uses counterfactual experiments to determine that monetary policy alone cannot account for the asymmetry.



Oil Price Shocks and the Macroeconomy: What Has Been Learned Since 1996

Donald W. Jones, Paul N. Leiby and Inja K. Paik

Year: 2004
Volume: Volume 25
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol25-No2-1
View Abstract

Abstract:
This paper reports on developments in theoretical and empirical understanding of the macroeconomic consequences of oil price shocks since 1996, when the U.S. Department of Energy sponsored a workshop summarizing the state of understanding of the subject. Four major insights stand out. First, theoretical and empirical analyses point to intra- and intersectoral reallocations in response to shocks, generating asymmetric impacts for oil price increases and decreases. Second, the division of responsibility for post-oil-price shock recessions between monetary policy and oil price shocks, has leaned heavily toward oil price shocks. Third, parametric statistical techniques have identified a stable, nonlinear, relationship between oil price shocks and GDP from the late 1940s through the third quarter of 2001. Fourth, the magnitude of effect of an oil price shock on GDP, derived from impulse response functions of oil price shocks in the GDP equation of a VAR, is around -0.05 and -0.06 as an elasticity, spread over two years, where the shock threshold is a price change exceeding a three-year high.



Price Asymmetry in Energy Demand Models: A Proxy for Energy-Saving Technical Change?

James M. Griffin and Craig T. Schulman

Year: 2005
Volume: Volume 26
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol26-No2-1
View Abstract

Abstract:
It has become fashionable to believe that energy and oil demand respond asymmetrically to price increases and decreases. Unfortunately, the asymmetric price model utilized by Gately and others has the unintended by-product of producing intercept shifts in the demand function purely in response to price volatility. Thus what is in fact energy saving technical change is attributed to price asymmetry. The two become observationally equivalent. Furthermore, the asymmetric price model has the peculiarity of being dependent on the starting point of the data period so that parameter estimates are not robust across different sample periods. We demonstrate empirically using a panel of OECD countries for oil and energy demand that symmetric price responses cannot be rejected after explicitly controlling for energy saving technical change within a fixed effects model.




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