The effects of electricity and fuel prices on Swedish industry: A panel VAR approach

In this paper, we empirically examine the dynamic effects of electricity and fuel price changes on factor demand, utilizing detailed firm-level data from the Swedish manufacturing industry spanning 2004–2022. We employ a panel vector autoregressive model to analyze factor inputs and their associated prices. Our findings indicate that the demand for electricity and fuel is inelastic both immediately following a price change and over the following five years. Additionally, our results show that energy price shocks generally do not have statistically significant effects on labor demand, nor do they indicate any significant inter-fuel substitution. • Panel VAR model used on 2004–2022 Swedish firm-level data. • Energy demand is inelastic short- and long-term. • No significant impact on labor demand from energy price shocks. • No evidence of inter-fuel substitution.