Dynamic Adjustments Of Energy Demand To Exchange Rate And Income Differentials: Evidence From Selected Opec Economies – Nardl Approach
Emmanuel Uche
Department of Economics, Abia State University, Uturu
Ikedinobi Sunday Nwamiri
PhD Scholar, Department of Economics, Abia State University, Uturu
Keywords: Exchange Rate, Energy Demand, National income, Asymmetry, OPEC
Abstract
The study explores the adjustments process of energy demand to exchange rates and incomes differentials in Iran, Venezuela, Nigeria and Algeria. It is expected that as exchange rates witness appreciations or depreciation; and national income fluctuates between positives and negatives, nations adjust their expenditure patterns and pricing policies for various good and services including energy. Coupled with inconclusive findings, previous studies ignored the potential effects of exchange rate in their energy demand specifications and this pave way for further studies. Our findings reveal the presence of varying effects of the exchange rates and income changes on energy demand in these economies. Exchange rate affects energy demand asymmetrically in Nigeria in both long- and short-run, only in the short-run in Iran and Algeria, without such effects in Venezuela. National income changes affect energy demand in Iran asymmetrically in both long- and short-run, only in the long-run in Venezuela, while it has symmetry effects in Nigeria and Algeria. Energy demand adjust faster to rising than falling incomes in Iran, while adjustment of equal rates to income changes was discovered in Venezuela. For exchange rates, energy demand in Nigeria adjusts faster to depreciation than appreciation while adjustments of equal rate are recorded in Algeria. The varying effects of the exchange rates and income on energy demand in these economies highlights the significance of country-specific and non-linear specifications. The findings are relevant for energy demand policy moderations.