The Estimation of Demand Function for Energy in Iranian Household Sector: A Dynamic Ordinary Least Square (DOLS) Approach

The recent advances in econometrics have led to the introduction of appropriate estimators for small samples and convergent series. DOLS approach which was introduced by Stock and Watson (1993), is not only suitable for small samples, but also useful for avoiding simultaneous bias and considers different cointegration among variables in the estimation.In this paper, we try to estimate the long-run demand elasticity of energy for household sector in Iran using the time series data for 1350 to 1380. According to our finding, price and income elasticities of demand for energy for household sector are -0.44 and 0.75 respectively.