The demand for gasoline in South Africa: An empirical analysis using co-integration techniques

Abstract

Using the recently developed Autoregressive Distributed Lag (ARDL) bound testing approach to co-integration, suggested by Pesaran et al. (Pesaran, M.H., Shin, Y., Smith, R.J. Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics 2001; 16(3) 289–326), we empirically analyzed the long-run relationship among the variables in the aggregate gasoline demand function over the period 1978–2005. Our study confirms the existence of a co-integrating relationship. The estimated price and income elasticities of − 0.47 and 0.36 imply that gasoline demand in South Africa is price and income inelastic.