An economic analysis of the demand of electricity in the Maltese islands

Abstract

The aim of this dissertation is to undertake an empirical analysis of the possible factors affecting electricity demand in Malta, through the application of the ARDL approach to Cointegration, based on a quarterly data set ranging from 2000 up to 2013. This study aims to quantitatively assess the short run and long run impacts of Electrical price, Compensation to Maltese households, Gross Value Added, Temperature and Inbound Tourism on the fluctuations in the demand for electricity in Malta. The study concludes that in the short-term, electrical consumption has been price and income inelastic, having the expected signs, implying possible economic policy recommendations. In addition, the Gross Value Added and inbound tourism also implied possible related economic policy recommendations provided that these were also statistically and economically significant, having their expected signs. On the other hand, the main conclusion with regards to the long-term electricity demand for Malta is that except for the seasonality variables, all of the underlying variables were found to be statistically and economically insignificant, implying that further research should be undertaken in this field of study in order to attain more robust short and long-term results.