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Abstract:
An Autoregressive Distributed Lag (ARDL) cointegration framework is used to examine the short-run and long-run characteristics of gasoline demand in the transport sector in Mauritius. Results indicate that gasoline demand, per capita income and real price of gasoline are integrated of order 1 and the ARDL bounds test confirms that these variables are cointegrated. The long-run income and price elasticities of gasoline demand are estimated to be 0.77 and -0.44 respectively. The short-run income elasticity is estimated to be 0.37 based on an ARDL error-correction model while the short-run price elasticity is found to be -0.21. The adjustment parameter is 0.48 which implies that around 95% of the demand adjustment occurring after five periods.

Keywords: gasoline demand, co integration, ARDL, bounds test, elasticities

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