Instability of electricity demand functions in the post-oil- embargo period

Abstract

The temporal stability of electricity demand functions with distributed lags is examined over the 1961–1980 period. The distributed lag models considered include the partial adjustment model, the unconstrained lag model, and the Almon polynomial lag procedure. Demand functions are estimated for the residential, commercial and industrial sectors and tested for stability in the pre- and post-oil-embargo period. Most of the demand functions estimated are statistically unstable over these periods. Although a partial-adjustment specification of the industrial demand equation appears to be stable, the income, price, and cross elasticities are significantly different over the subperiods for the residential and commercial demand equations.