Economics

The price and income elasticities of natural gas demand in Azerbaijan: Is there room to export more?

S. Gurbanov, J. I. Mikayilov, et al.

Dive into this insightful study by Sarvar Gurbanov, Jeyhun I. Mikayilov, Shahriyar Mukhtarov, and Shahin Maharrami, which reveals that the demand for natural gas in Azerbaijan is both income-sensitive and price-responsive. With a long-run income elasticity of 0.8, this research highlights the need for policies that can transform the landscape of energy consumption while enhancing export potential.

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Abstract

This paper estimates income and price elasticities of natural gas demand for Azerbaijan using various econometric techniques, including Autoregressive Distributed Lagged Structural Time Series Modeling, Dynamic Ordinary Least Squares Method, Fully Modified Ordinary Least Squares, Canonical Cointegrating Regression, and General to Specific under Autometrics. The findings show a long-run income elasticity of around 0.8 and a long-run price elasticity of around -0.1, classifying natural gas as a necessity and normal good. Policy implications suggest facilitating renewable substitutes for residential and commercial use and freeing up natural gas from power generation via renewable energy sources to increase export potential.

Publisher

Humanities & Social Sciences Communications

Published On

Jul 31, 2023

Authors

Sarvar Gurbanov, Jeyhun I. Mikayilov, Shahriyar Mukhtarov, Shahin Maharrami

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