Seasonality, cointegration and forecasting UK residential energy demand

Clements, M. P. ORCID: https://orcid.org/0000-0001-6329-1341 and Madlener, R. (1999) Seasonality, cointegration and forecasting UK residential energy demand. Scottish Journal of Political Economy, 46 (2). pp. 185-206. ISSN 1467-9485 doi: 10.1111/1467-9485.00128

Abstract/Summary

Much of the short-run movement in energy demand in the UK is seasonal, and the contribution of long-run factors to short-run forecasts is slight. Nevertheless, using a variety of techniques, including a recently developed estimation procedure that is applicable irrespective of the orders of integration of the data, we obtain a long-run income elasticity of demand of about one third, and we are unable to reject a zero price elasticity. An econometric model is shown to provide superior short-run forecasts to well-known seasonal time series models ex post, but is inferior to Box-Jenkins SARMA models when the determinants themselves have to be forecast. However, the relatively short data sample and small number of forecasts suggest caution in generalising these results.