A Panel Data Analysis of the Demand for Electricity in Canada

Abstract

The article uses panel data from the Statistics Canada (1983–2010) to examine the determinants of electricity consumption in Canada. The estimations from the Fully Modified Ordinary Least square (OLS) and Dynamic OLS models suggest that per capita real Gross Domestic Production (GDP) has a significant positive while electricity price has a negative, but insignificant impact on per capita electricity consumption. The study uses Panel Vector Error Correction Model (VECM) to examine long and short run causality among the variables. The Panel VECM results suggest that there is a long run causal relationship among electricity consumption, real GDP and electricity price. The Panel VECM results further suggest that unidirectional short run causality runs from per capita real GDP to per capita electricity consumption.