Department of Economics and Statistics, Dr. Hasan Murad School of Management (HSM), University of Management and Technology Lahore, Pakistan
Abstract
The problem of energy is one that has plagued the economic growth of Pakistan for decades; the resulting domestic pressure has often led to the misallocation of resources, and therefore should be studied extensively for evidence based policy recommendation. The study in hand aims to envelope and analyze approximate factors responsible for determining electricity demand in the country. The study analyzes the aggregate demand for electricity in Pakistan from 1975-2016, by considering log-run climatic variable affecting electricity demand. The ADF, the Johansen Cointegration, and the ARDL techniques have been applied for the estimation of parameters and analysis. The scientific analysis found that in the short run and long run number of consumers, income (real GDP per capita) square of income and stock of appliances have a significant relationship with the demand of electricity. Where all significant relationships in the long run have a positive relationship with the demand apart from the square of income which may suggest a shift towards alternate means of energy production with a long term sustained growth in income. While, price is found to be insignificant determinant of electricity demand in both short run and long run, which reveals that electricity is considered a necessity by Pakistan’s electricity consumers. In the short run number of consumers, income, squared income, and stock of appliances, all have significant positive relationships with demand, and temperature has an insignificant positive relationship in the short run, but a significant positive relationship in the long run
