Estimating underlying energy demand trends using UK annual data

J. Dimitropoulos, Lester Hunt, Guy Judge

Research output: Contribution to journalArticlepeer-review


Employing the Structural Time Series Model (STSM) approach suggested by Harvey (1997), and based on annual data for the UK from 1967–2002, this paper reiterates the importance of using a stochastic rather than a linear deterministic trend formulation when estimating energy demand models, a practice originally established by Hunt et al. (2003a, 2003b) using quarterly UK data. The findings confirm that important non-linear and stochastic trends are present as a result of technical change and other exogenous factors driving demand, and that a failure to account for these trends will lead to biased estimates of the long-run price and income elasticities. The study also establishes that, provided these effects are allowed for, the estimated long-run elasticities are robust to the different data frequencies used in the modelling.
Original languageEnglish
Pages (from-to)239-244
Number of pages6
JournalApplied Economics Letters
Issue number4
Publication statusPublished - 2005


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