What is the nature of responses of energy security to shocks in the E7 countries? Fresh evidence by applying unit root tests

Abstract

ABSTRACT Energy security, characterized by equitable distribution of sustainable, acceptable and affordable energy sources, carries significant social, economic,\\ and environmental consequences. Achieving energy security is influenced by unanticipated shocks, such as oil price volatility, and policy decisions, including diversifying energy sources and developing green technologies. To gauge the efficiency of shocks and policies in altering energy security dynamics of E7 countries, the present study uses the Energy Security Risk Index (ESRI) as a proxy of energy security and employs panel Lagrange multiplier (LM) with smooth breaks and univariate LM unit root test with sharp breaks. In addition, both tests allow for cross-sectional dependence. Our findings reveal distinct dynamics across countries over the period 1980–2018. Specifically, Brazil, India, Indonesia and Turkey exhibit stationary behaviour in their ESRI, while China shows a unit root process. The stochastic properties of Mexico are inconclusive. Our results have important implications, which are discussed in detail.