Regression Specification

Q_t = a + b(Price_t) + c(Driver_t) + dQ_t-1.

One year price elasticity = b(P/Q).

Two year price elasticity = (1+d)b(P/Q).

Three year price elasticity = (1+d+d²)b(P/Q).

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Long run elasticity = (1/(1-d))b(P/Q).

Sometimes more than one price and/or more than one driver is selected. The drivers are macroeconomic activity variables typically provided each iteration by the Macroeconomic Activity Module, e.g., total floorspace is used as the driver for Commercial Sector demand.

Example.

Endogenous Variable:

Table #2 Energy Consumption by Sector and Source (quadrillion Btu, unless otherwise noted)

Sector and Source Commercial: Electricity

Exogenous Variables:

# 1) Table #3 Energy Prices by Sector and Source (2005 dollars per million Btu, unless otherwise noted)

Sector and Source Commercial: Electricity

# 2) Table #5 Commercial Sector Key Indicators and Consumption (quadrillion Btu, unless otherwise noted)

Key Indicators and Consumption Total Floorspace (billion squar: Total

# 3) Lagged Table #2 Energy Consumption by Sector and Source (quadrillion Btu, unless otherwise noted)

Sector and Source Commercial: Electricity

Exogenous

Variable Mean Coefficient Elasticity t-statistic

Variable# 1 23.67473 -.02482 -.115481 -12.796979

Variable# 2 84.3015 .041423 .68628 15.913449

Variable# 3 4.984052 .332754 .325934 7.16882

Constant .525455

Endogenous Mean SER R-sq LR-Multiplier

Variable 5.088333 .050975 .984956 1.498697631758