An Analysis of UK Energy Demand Using Multivariate Cointegration
ABSTRACT In this paper we estimate an aggregate energy demand equation by a maximum likelihood procedure proposed by Johansen (1988) for the UK using annual data from 1967 to 1994. The influence of the price of energy, income and temperature on energy consumption is examined. A unique long-run equilibrium relationship between energy demand, income and price is found to exist for the period, with temperature affecting demand only in the short-run. The resultant estimated elasticities are robust to different specifications and corroborates the findings of Hunt and Manning (1989) although a weaker long-run effect of income on energy demand was observed.