Are fluctuations in natural gas consumption per capita transitory? Evidence from time series and panel unit root tests

Abstract

The stationary properties of natural gas consumption are essential for predicting the impacts of exogenous shocks on energy demand, which can help modeling the energy-growth nexus. Then, this paper proposes to investigate the panel unit root proprieties of natural gas energy consumption of 48 countries over the period of 1971–2010. We apply the Harvey et al. [69] linearity test in order to determine the type of the unit root tests (the Kruse (2010) nonlinear unit root or LM (Lagrange Multiplier) linear unit root tests). Our results show that the stationarity of natural gas consumption cannot be rejected for more than 60% of countries.In order to provide corroborating evidence, we employed not only the first and second generation panel unit root tests, but also the recent LM panel unit root test developed by Im et al. [28]. This test allows for structural breaks both in intercept and slope. The empirical findings support evidence in favor of stationarity of natural gas consumption for all panels. These results announce that any shock to natural gas consumption has a transitory impact for almost all countries implying that energy consumption will turn back to its time trend.