Elasticities of Gasoline and Fuel Demands in Switzerland

Posted by D. Daniel Sokol

Andrea Baranzini, Geneva School of Business Administration - Haute Ecole de Gestion (HEG) de Genève, University of Applied Sciences, Western Switzerland (HES SO) and Sylvain Weber, University of Neuchatel - Institute for Research in Economics (IRENE) analyze Elasticities of Gasoline and Fuel Demands in Switzerland.

ABSTRACT: Using co-integration techniques, we investigate the determinants of gasoline and fuel demands in Switzerland over the period 1970-2008. In particular, we focus on the impact of prices and estimate the demand price elasticities. In the short run, we obtain very weak price elasticities of -0.09 for gasoline demand and -0.08 for fuel demand. In the long run, the corresponding estimates are -0.34 and -0.27. The exceptionally rich dataset we built allows us to work with quarterly data and with more explicative variables than usual in this literature. In addition to the traditional price and income variables, we account for variables like vehicles stocks, fuel prices in neighboring countries, oil shocks and fuel taxes. All of these additional variables are found to be significant determinants of of demand.