Is per capita energy use stationary? Time series evidence for the EMU countries

Cosimo Magazzino

doi:10.1177/0144598716679926

Abstract

This study examines the stationary properties of per capita energy use in the 19 Eurozone member countries by using annual data over 1960–2013 period. We utilize the Clemente et al. unit root test that determines structural breaks. Empirical results show that most of the country series does not reject the unit root null hypothesis at the 5% significance level, both in the case of additive outlier and of innovative outlier. Therefore, our empirical findings provide significant evidence that energy use is nonstationary in almost all Eurozone countries. For the policy makers, it is necessary to pay attention to energy use series.

Highlights

The stationarity and unit root properties of per capita energy or electricity series are explored by an increasing amount of studies, which use different methodologies
We investigated the stationary properties of per capita energy use in 19 Eurozone member states by using yearly data over the 1960–2013 period
According to the unit root test results, we found that most of the country series does not reject the unit root null hypothesis at the 5% significance level, both in the case of additive outlier and of innovative outlier

Summary

Introduction

The issue of whether energy use is stationary has important implications for modeling The findings from these studies have important policy implications (Mishra et al, 2009). If energy series is nonstationary and is characterized by hysteresis or path dependency, innovations in the world oil market will have permanent effects on energy used. Energy consumption has always aligned relationships with an economic system and is vitally correlated with the economic system (Hsu et al, 2008) In this literature, an interesting aspect is related to the effect of structural breaks. The majority of the studies about the stationarity of energy found that this series is nonstationary when the structural breaks are not considered. Taking structural breaks in the energy use series will significantly increase the power of the unit root tests. The fourth section summarizes the conclusions we draw and briefly the policy implications that emerge

Literature review

Methodology and data

Findings

Conclusions and policy implications