Persistence in per capita energy consumption: A fractional integration approach with a Fourier function

Seref Bozoklu, Veli Yilanci and Muhammed Sehid Gorus

Energy Economics, 2020, vol. 91, issue C

Abstract: In this study, we investigate the degree of persistence for aggregate energy consumption per capita for 113 countries over the period 1960–2014 through a recently introduced fractional unit root test with a Fourier function to allow multiple smooth structural breaks. We also employ the ADF unit root test, the efficient Wald test for fractional unit-roots, and the Fourier ADF test to make a comparison and to enrich the study. The empirical results considering the fractional Fourier unit root test indicate two crucial points. First, shocks have only temporary effects on energy consumption per capita, and it will vanish slowly as a result of the long memory characteristic. Therefore even transitory shocks have persistence effects, which require permanent policies due to their nature. This inference is different from what would be erroneously suggested by the dichotomous approach for stationarity and nonstationarity that temporary shocks will have transitory effects. Second, the integration degree of energy consumption per capita may change due to the existence of a structural break; therefore, policymakers must be aware of the varying integration degree to design and implement the best policies.

Keywords: Energy consumption; Fractional integration; Fourier function (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:91:y:2020:i:c:s0140988320302668

DOI: 10.1016/j.eneco.2020.104926

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