ROAD TRANSPORT ENERGY DEMAND IN AUSTRALIA - A COINTEGRATION APPROACH

A cointegration framework is used to examine the short-run and long-ru n characteristics of energy demand in the Australian road transport se ctor. A lagged endogenous equation based on a partial adjustment proce ss is proposed and estimated. Results indicate that energy demand, out put and real energy prices ave integrated of order 1 and cointegrated. The long-run output and price elasticities of energy demand are estim ated to be 0.52 and -0.12 respectively. Causality tests reveal a bidir ectional causality path between output and energy demand and a unidire ctional path from energy consumption to prices. No other causality pat hs between output, prices and energy demand are detected. The short-ru n output elasticity of energy demand is estimated to be 0.25 based on an error-correction model. The short-run price elasticity is found to be insignificant. The inertia parameter is 0.48 corresponding to 95% o f the demand adjustment occurring after five periods. The results are compared with previous findings and the variations ave partially attri buted to the structural changes in the road transport sector in the 19 80s, some of which are discussed.