DEMAND FOR GASOLINE IN KUWAIT - AN EMPIRICAL-ANALYSIS USING COINTEGRATION TECHNIQUES

This paper estimates the demand for gasoline in Kuwait for the period 1970-89 using a cointegration and error correction model (ECM). It is found that gasoline demand is inelastic with respect to price in the s hort and long run, and while it is elastic in the long run, gasoline d emand is inelastic with respect to income in the short run. This sugge sts that gasoline demand response to income changes is higher in the l ong run than in the short run. Furthermore, gasoline consumption adjus ts towards its long-run level with about 52% of the adjustment occurri ng in the first year.