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Are Shocks To Electricity Consumption Permanent Or Transitory? Evidence From A Panel Stationarity Test With Gradual Structural Breaks For 25 Oecd Countries

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  • Jamal G. HUSEIN
  • S. Murat KARA

Abstract

This study re-examines the stationarity properties of per capita electricity consumption for 25 OECD countries during the 1960-2014 period. We apply a newly developed panel stationarity test that models structural shifts as a gradual process via a Fourier function. This Fourier panel stationarity test takes cross-sectional dependence into account and allows heterogeneity across cross-sections in the panel. However, rather than assuming the presence of a structural shift or a nonlinear deterministic component, we formally test the linearity hypothesis of each time-series utilizing a novel test. Moreover, for robustness check, we apply a panel stationarity test incorporating abrupt structural breaks and employ several new panel stationarity tests that complement the Fourier panel test. For the period of study, we find strong empirical evidence supporting stationarity of per capita electricity consumption for the 25 OECD countries. Therefore, shocks to electricity consumption will have a transitory effect as per capita electricity consumption will, after a shock, return to its long-run trend path.

Suggested Citation

  • Jamal G. HUSEIN & S. Murat KARA, 2023. "Are Shocks To Electricity Consumption Permanent Or Transitory? Evidence From A Panel Stationarity Test With Gradual Structural Breaks For 25 Oecd Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 23(1), pages 57-76.
    • Handle: RePEc:eaa:aeinde:v:23:y:2023:i:1_3
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    2. Tran, Nhan Dang & Sahu, Naresh Chandra & Le, Chon Van, 2024. "Evidence on the stationarity of electricity consumption in India," Utilities Policy, Elsevier, vol. 88(C).

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    More about this item

    Keywords

    Electricity consumption; OECD; Structural breaks; Fourier approximation; Panel stationarity tests;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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