Modeling of Persistence and Seasonality in Sectoral Energy Consumption in the USA Using Fractionally Integrated Processes: Implications for Economic Policy

Abstract

This study delves into the examination of long memory behavior in the monthly sectoral energy consumption of the USA through the use of fractional integration [I(d)] framework. Also, seasonality effects are accounted for as seasonal patterns are prominent features of series of this nature. For robustness sake, the analysis is carried out on both primary and total energy consumption of each sector. The results show that the sectoral energy consumption of both energy consumption forms (primary and total) exhibit long memory behavior, although the degree of persistence varies from one sector to another. Putting seasonality into consideration, the energy consumption series across all the sectors are not only persistent, but indicate very strong seasonal patterns and highly significant autoregressive components. These findings have important implications for the formulation and implementation of effective energy and environmental policies.