Shahid Beheshti University Journal of Economics and Modelling 2476-5775 3 9 2012 05 21 Estimating the Long-Term Demand of Energy in the Sector of Industries and Mines through the Two-Stage Estimation Approach and Simulation of the Effects of Increasing Energy Price on Consumption Control Estimating the Long-Term Demand of Energy in the Sector of Industries and Mines through the Two-Stage Estimation Approach and Simulation of the Effects of Increasing Energy Price on Consumption Control 1 41 57459 FA Mohammad Naser Sherafat Department of Economics, Faculty of Economics and Political Science, Shahid Beheshti University Rasam Moshrefi Department of Economics, Faculty of Economics and Political Science, Shahid Beheshti University Journal Article 2012 10 06 The sector of Industries and mines is one of the important sectors of Iran's economy. This sector consumes more than 23% of total energy consumption, and its production is dependant on energy input. Therefore, the policy of increase in energy price decreases the demand of energy as an intended result. However, this policy could have some side effects. In this paper, at first, energy demand in industries and mines sector has been estimated by two stage estimation approachs, and then by estimation of  production and price function, a simulation model has been developed. In this simulation model, the effects of increasing energy price on energy consumption and value added in sector of industries and mines have been studied. More ever, the inflationary side effects of changes in energy price have been included. Based on simulation results, increase in the energy price in general could decrease energy consumption in the sector of industries and mines. It should be considered that the inflationary side effects of energy price increase could diminish energy consumption reduction. However, if the policy of increasing energy price, companied with two shocks of devaluation of national currency and liquidity increase, was realized as it was the case in Iran, the secondary inflationary cycle could wipe out the intended energy saving results of energy price policy, Hence, the steady state result of energy price policy could just be inflation. The sector of Industries and mines is one of the important sectors of Iran's economy. This sector consumes more than 23% of total energy consumption, and its production is dependant on energy input. Therefore, the policy of increase in energy price decreases the demand of energy as an intended result. However, this policy could have some side effects. In this paper, at first, energy demand in industries and mines sector has been estimated by two stage estimation approachs, and then by estimation of  production and price function, a simulation model has been developed. In this simulation model, the effects of increasing energy price on energy consumption and value added in sector of industries and mines have been studied. More ever, the inflationary side effects of changes in energy price have been included. Based on simulation results, increase in the energy price in general could decrease energy consumption in the sector of industries and mines. It should be considered that the inflationary side effects of energy price increase could diminish energy consumption reduction. However, if the policy of increasing energy price, companied with two shocks of devaluation of national currency and liquidity increase, was realized as it was the case in Iran, the secondary inflationary cycle could wipe out the intended energy saving results of energy price policy, Hence, the steady state result of energy price policy could just be inflation. https://ecoj.sbu.ac.ir/article_57459_b9afb917ad9c49d82d6f856b258e3eb5.pdf