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Revisited: Are shocks to energy consumption permanent or temporary? New evidence from a panel SURADF approach

Yi-Chung Hsu, Chien-Chiang Lee () and Chi-Chuan Lee

Energy Economics, 2008, vol. 30, issue 5, 2314-2330

Abstract: This paper explores whether the hypothesis of energy consumption stationarity is supported in different regions. The stationarity properties indicate that the impact of a reduction in energy consumption or a realignment policy is only temporary, and over time the series will revert back to the trend path. This paper first applies the panel seemingly unrelated regressions augmented Dickey-Fuller (Panel SURADF) test developed by Breuer et al. [Breuer, J.B., McNown, R., Wallace, M.S., 2001. Misleading inferences from panel unit-root tests with an illustration from purchasing power parity. Review of International Economics 9(3), 482-493], which allows us to account for possible cross-sectional effects and to identify how many and which members of the panel contain a unit root. The main conclusion is that the stationarity of energy consumption will be affected by the differences among the five regions made up of 84 countries during the period 1971-2003. Similar conclusions are reached when we analyze country-groups based on levels of development. Moreover, the results reveal that conventional panel unit root tests can lead to misleading inferences which are biased towards stationarity, even if only one series in the panel is strongly stationary. Lastly, some policy implications emerge from our results.

Date: 2008
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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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