Investigating the Impact of Uncertainty in Macroeconomic Variables on Electricity and Gas Consumption in Iran (Markov-Switching approach)

According to the effect of the macroeconomic variables uncertainty range on electricity and gas consumption and its importance in economic growth and development, this article examines the uncertainty of macroeconomic variables (inflation, exchange rate, economic growth, and oil prices) on electricity and gas consumption in the period of 1981-2020.To this end, the volatility and uncertainty of inflation, exchange rate, oil price, and economic growth were initially estimated using the Autoregressive Conditional Heteroscedasticity (ARCH) and Generalized ARCH (GARCH) models, and then the model was estimated using the nonlinear Markov-Switching approach. The estimates of Markov-Switching model revealed that, by considering two optimal lags, the inflation uncertainty, exchange rate, economic growth, and oil price had a significant positive impact on electricity and gas consumption, and the intensity of effective of uncertainty of  macroeconomic variables differed in both regimes, and it was higher in regime I than regime II. Overall, reducing the electricity and gas consumption intensity through macroeconomic variables uncertainty (inflation, exchange rate, economic growth, and oil price) seems more possible in the long run; because the long-term effect of such variables on electricity and gas consumption generally arises from the uncertainty of macroeconomic variables.