Modeling OECD energy demand: An international panel smooth transition error-correction model

Chien-Chiang Lee () and Yi-Bin Chiu

International Review of Economics & Finance, 2013, vol. 25, issue C, 372-383

Abstract: This study is the first to apply a newly developed panel smooth transition regression model with the error-correction term (PSECM) to estimate the non-linear relationship among energy consumption, real income and real energy prices for 24 OECD countries. Unlike the existing literature on non-linear estimation, we consider five “candidates” for the threshold variable including per capita real GDP, real energy prices, energy intensity, the ratio of gross capital formation to GDP, and error-correction term to explore which threshold variable is suitable for the non-linear energy demand model. Our empirical results demonstrate that energy consumption, real income and real energy prices can be cointegrated, and are in favor of the non-linearity for energy demand when the energy intensity and the ratio of gross capital formation to GDP are considered as the threshold variables. Furthermore, the results indicate that the adjustment speed toward long-run equilibrium of PSECM is small and approximately 7–17% in 1year.

Keywords: Energy consumption; Non-linearity; Panel smooth transition regression; Economic growth (search for similar items in EconPapers)
JEL-codes: C33 N70 Q43 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:25:y:2013:i:c:p:372-383

DOI: 10.1016/j.iref.2012.08.002

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