Aggregate Energy Demand in Korea: An Empirical Model with Total Factor Productivity

Abstract

This study examines the relationship among energy demand, GDP, real energy price, and total factor productivity in Korea. Total factor productivity is introduced into the model as a proxy variable for technical change, which helps to identify correctly the long-run relationship. This study employs various cointegration tests and estimation methods, yielding robust evidence of a cointegrating relationship and reliable estimates of the parameters. The estimated error correction model forecasts that the growth of energy demand in Korea will slow down as economic growth depends more on total factor productivity than in the past.