Demand for gasoline in Kuwait: An empirical analysis using cointegration techniques

Abstract

This paper estimates the demand for gasoline in Kuwait for the period 1970–1989 using a cointegration and error correction model (ECM). It is found that gasoline demand is inelastic with respect to price in the short and long run, and while it is elastic in the long run, gasoline demand is inelastic with respect to income in the short run. This suggests that gasoline demand response to income changes is higher in the long run than in the short run. Furthermore, gasoline consumption adjusts towards its long-run level with about 52% of the adjustment occurring in the first year.