We examine oil demand in a 53 country panel of countries constituting
about 75% of world oil demand. We use appropriate panel techniques allowing for
parameter heterogeneity, cross-sectional dependence, dynamics and non-stationarity
to provide consistent estimates of price and output elasticities. The use of country-level data removes the endogeneity bias associated with estimates of short-run price
elasticities, and cointegration ensures that in long-run elasticities endogeneity is a
second-order problem. New results are presented for groups of countries. Short-run
price elasticities are found to be small, while the long-run are at the low end of previous
estimates. Short-run output elasticities are similar to long-run values, which are less
than unity for all but Latin America. There are diﬀerences between groups - Asian
elasticities are lower than is commonly argued.
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