Specification and estimating of econometrics model for gasoline demand
Establishing of an error correction version of ARDL for gasoline demand requires monitoring of gasoline demand determinants. Economic, technical, cultural and social factors are the main determinants of gasoline demand[1].
Automobile production technology, average life of automobile and situation of public transportation network are as technical factors; and income, preferences, relative prices, wealth and expectations are as economic factors in determining the gasoline demand. In Iran there exist an expanded resources of crude oil, natural gas and coal. So, a group of people in Iran believe that in order to use of this relative advantages share of gasoline cost in their firms production costs and household expenditures must be smaller in respect to other countries. This belief has an importance role in lower prices of gasoline and high growth rate of its consumption in Iran. The amount of cars and their combination is another determinants of gasoline consumption in macro level. In Iran, crucial increase in the amount of cars had a large effect on gasoline consumption[2].
An error correction version of ARDL models are used in analyzing of short and long-run relationship between demand of gasoline and its price. This dynamic model has been introduced to economic literature by Philips for the first time and then by other economist like Hendry[3]. The statistical base of such models is existence of co integration between the variables. The error correction version of ARDL model determines long-run relationship between variables. In this model short – run behavior of variables is related to the value of long-run equilibrium between them. In the other hand, this model explains that how long-run disequilibrium between variables will affect their short-run dynamic changes[4].
Relative price of gasoline and consumers incomes have the most effect on gasoline demand. So, these variables are used in the gasoline demand modeling and the error correction version of ARDL model for gasoline is as bellow: