Analysis of Energy Demand in Agricultural Sector

Abstract

Due to importance of energy factor in agricultural sector and considering the increasing energy price in recent years, analysis of energy demand is very important. In this paper in order to analyse agricultural energy demand, OLS, FMOLS and Johansen cointegration method and ARDL approach has been used and results of these methods have been compared. Data on energy price index, energy consumption and agricultural value added for priod 1355-1388 were used. Results showed that long run and short run price elasticity of energy consumtion are between -0.3 to -0.327 and -0.09 to -0.102 respectively. Also income elasticity of energy consumption estimated egual to 0.7. Results of OLS estimation of Log-Log model, Johansen cointegration method and ARDL approach are very similar. Because of price inelasticity of energy consumption especially in the shortrun, price policies are not likely to reduce energy consumtion considerably. Price policies can be more effective in the longrun, but this is subject to improvemeats in the energy consumption technology.

Keywords

• Agricultural Sector; Energy Demand; Cointegration; ARDL approach; FMOLS Method