Underlying Trends and Seasonality in Kosova Gasoline Demand: A Time-Series Analysis
Valon Kastrati
European University of Tirana
Abstract
This paper analyzes the demand for fuels in Kosovo automotive sector, using the data to
estimate price and income elasticities for all the available fuels in the automotive sector:
gasoline, automotive gas oil distributed among months of the year. These estimates can
be very useful in predicting the overall impacts of price policies designed to reduce fuel
consumption and to address concerns of carbon emissions or energy security. The paper
aimed at estimating the price and income elasticities of automotive fuels demand in
Kosovo. The analysis of the expenditure allocation process among the gasoline, Gas oil
and LPG was carried out through the estimation of a linear approximation of an ECM
model. This model is very convenient due to its ability to fulfill much of the desired
theoretical properties of demand, being at the same time parsimonious regarding the
number of parameters. Furthermore, the equations to be derived from ECM are linear in
parameter, which allows the use of econometric methods widely available in terms of
testing and estimating procedures. Uncompensated (Marshallian) price and expenditure
elasticities were calculated from estimated parameters of the ECM. The results show that
all own-price elasticities are negative and statistically significant. The own- price
elasticity of LPG is most elastic. Moreover, expenditure elasticities for gasoline and gas
oil are positive and significant at the 5 percent significance level; the expenditure
elasticity for gasoline is the most elastic. The estimations here produced suggest that
LPG is inferior good. Overall this paper tried to improve the understanding of the
consumer’s behavior and their possibilities and criteria to choose automotive fuel in
Kosovo. Empirical results indicate all own-price elasticities are negative and significant
at 5% level. The own-price elasticity for gas oil, gasoline and LPG were estimated by
about -0.22, -1.01 and -3.58, respectively. The findings also show that gasoline and gas oil
are normal goods and LPG being an inferior good.
Keywords: Automotive fuel, Gasoline, Elasticity, ECM model.
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