The Impact of Fuel Price on Road Transportation Demand: Time-Varying Parameter and Kalman-Filter Approach

Document Type : Research Paper


1 Assistant Professor of Economics, Kharazmi University

2 M.A. in Economics and Social Engineering System, Kharazmi University


In recent years, the increase of fuel price and implementation of targeted subsidies have the different effects on the economic sectors and especially on the road transportation sector. For this, the road transportation sector has been considered as main sectors in transportation system. The purpose of this paper is to investigate the effect of fuel price on the road transportation demand during 1997-2014.  The empirical econometric model has been estimated by TVP and Kalman-Filter algorithm. The main findings of this study reveal that the fuel price and age of transportation system have negative and other explanatory variables such as national income and numbers of vehicles have positive and significant impact on the road transportation in Iran during the period of study. Moreover, the targeted subsidies rule in Iran has led to decrease of road transportation shipment. Hence, the effects of new vehicle and national income are positive in final state and time varying situations.


Main Subjects

  1. Afandizadeh, S., and Gholizadeh, H. (2008). Estimation of passenger transportation service in road transportation system. 8th Traffic and Iranian Transportation Engineering Conference of Iran(In Persian).
  2. Bazdar Ardebili, P., and Pejman Zad, P. (2008). Application of AIDS in analysis of rail transportation for urban and rural households. 10th Conference of Rail Transportation (In Persian).
  3. Beko, J. (2003). Demand functions for services of public railway passenger transportation: An empirical analysis for Slovenia. Managing Global Transitions1(2), 135.
  4. Central Bank of Iran (1996-2014). Balance sheet of central bank of Iran (In Persian).
  5. Couto, A., & Maia, L. (2009, June). The demand for rail freight transport in Europe. In International Transport Economics Conference (ITrEC), 2009, Minneapolis, Minnesota, USA.
  6. Dahl, C., & Sterner, T. (1991). Analysing gasoline demand elasticities: A survey. Energy economics13(3), 203-210.
  7. Esmailnia, A. (2000). The impact of gasoline price on its consumption with empathis on kalman filter and state space models. Quarterly Journal of Plan and Budgeting, 52, 33-61 (In Persian).
  8. Ezzati, M., and Agheli Kohneh Shahri, L. (2005). Estimation of passenger elasticity in rail transportation system of Iran. Quarterly Journal of Transportation Research, 3, 181-189 (In Persian).
  9. Footros, M. H., Sahraei, R., and Yavari, M. (2014). Estimation of road transportation energy demand in Iran during the 1978-2013. Quarterly Journal of Strategic Policies and Macroeconomic, 2(7), 23-42 (In Persian).
  10. Fouquet, R. (2012). Trends in income and price elasticities of transport demand (1850-2010). Energy Policy, 50, 50-61.
  11. Jahangard, E., Farhadi Kia, A. and Mahboob Khalajani, H. (2006). Outcome of gasoline price adjustment and airplane fuel on consumption and road and air production cost. Quarterly Journal of Plan and Budgeting, 98, 141-178 (In Persian).
  12. Kafaei, M.A., and Sabouri Karkhaneh, H. (2011). Inflationary impact of fuel price for road transportation. Quarterly Journal of Transportation Research, 8(1), 35-45 (In Persian).
  13. Khaksari, A., and Bazdar Ardebili, P. (2006). Elasticity of fuel demand in road transportation system. Quarterly Journal of Economic Research, 6(1), 1-11. (In Persian).
  14. Kulshreshtha, M. (2001). A multivariate co-integration vector auto regressive model of freight transport demand: Evidence from Indian railway. Transportation Research, 35(6), 1-72.
  15. Ling Khoo, H., Ong, G.P.و and Khoo, W.C. (2012), Short-term impact analysis of fuel price policy change on travel demand in Malaysian citie. Transportation Planning and Technology, 35(7), 102-112.
  16. Matajic, M., Jargic, T., and Beko, J. (2015), A differentiated tolls system - an effective transport policy tool for Slovenia? Applied Economics, 47(21), 2201-2217.
  17. Mustapa, S., and Bekhet, H.A. (2016). Analysis of CO2 emissions reduction in the Malaysian transportation sector: An optimization approach. Journal of Energy Policy, 89(1), 171-183.
  18. Seyfipour, R., and Amini, F. (2012). The impact of fuel price on road and rail transportation and its share in total transportation. Quarterly Journal of Transportation Engineering, 3(4), 315-332 (In Persian).
  19. Small, K. A., and Van Dender, K. (2007). Long run trends in transport demand, fuel price elasticity and implication of the oil outlook for transport policy. Joint Transport Research Center, Discussion Paper No. 16.
  20. Ministry of Roads and Urban Development of Iran (1996-2014). Statistical year book (In Persian).
  21. Yang, Y., QI, A., Qlan, O., Xu, Q., and Yang,,L. (2010). Public transport subsidies based on passenger volume. Journal of Transportation Systems Engineering and Information Technology, 10(3), 69-74.
  22. Yao, V. W (2005). The causal linkages between freight transport and economic fluctuations. International Journal of Transport Economics, 32(2), 143-159.
  23. Zivot, E., and Andrews, W.K. (1991), Further evidence on the great cash, the oil-price shock, and unit-root hypothesis. American Statistical Association, 10(3), 251-270.