Elasticities of Supply for the US Natural Gas Market

15 Pages Posted: 7 May 2014

See all articles by Micaela Ponce

Micaela Ponce

University of Potsdam

Anne Neumann

German Institute for Economic Research (DIW Berlin)

Date Written: April 2014

Abstract

In this paper we investigate natural gas producer's reactions to changes in market prices. We estimate price elasticities of aggregated supply in the most competitive market for natural gas: the United States. Using monthly time series data form 1987 to 2012 our analysis is based on an Autoregressive Distributed Lag (ARDL) Bound Cointegration approach to obtain short and long-run elasticities of natural gas supply. Results suggest that natural gas producers in a competitive market are not able to react to prices in the very short-run but respond inelastic in the long-run. These findings are not only of great value for policy makers but also for gas market modelers.

Keywords: financial autarky, complete markets, long-run risk, anomalies

JEL Classification: L95, Q41, C22, C32

Suggested Citation

Ponce, Micaela and Neumann, Anne, Elasticities of Supply for the US Natural Gas Market (April 2014). DIW Berlin Discussion Paper No. 1372, Available at SSRN: https://ssrn.com/abstract=2433002 or http://dx.doi.org/10.2139/ssrn.2433002

Micaela Ponce

University of Potsdam ( email )

August-Bebel Strasse 89
Potsdam, 14482
Germany

Anne Neumann (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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