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Disaggregated energy consumption and GDP in Taiwan: A threshold co-integration analysis

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  • Hu, Jin-Li
  • Lin, Cheng-Hsun

Abstract

Energy consumption growth is much higher than economic growth for Taiwan in recent years, worsening its energy efficiency. This paper provides a solid explanation by examining the equilibrium relationship between GDP and disaggregated energy consumption under a non-linear framework. The threshold co-integration test developed with asymmetric dynamic adjusting processes proposed by Hansen and Seo [Hansen, B.E., Seo, B., 2002. Testing for two-regime threshold cointegration in vector error-correction models. Journal of Econometrics 110, 293-318.] is applied. Non-linear co-integrations between GDP and disaggregated energy consumptions are confirmed except for oil consumption. The two-regime vector error-correction models (VECM) show that the adjustment process of energy consumption toward equilibrium is highly persistent when an appropriately threshold is reached. There is mean-reverting behavior when the threshold is reached, making aggregate and disaggregated energy consumptions grow faster than GDP in Taiwan.

Suggested Citation

  • Hu, Jin-Li & Lin, Cheng-Hsun, 2008. "Disaggregated energy consumption and GDP in Taiwan: A threshold co-integration analysis," Energy Economics, Elsevier, vol. 30(5), pages 2342-2358, September.
    • Handle: RePEc:eee:eneeco:v:30:y:2008:i:5:p:2342-2358
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