The Study on the Stationarity of Energy Consumption in US States: Considering Structural Breaks, Nonlinearity, and Cross- Sectional Dependency
This study applies the sequential panel selection
method (SPSM) procedure proposed by Chortareas and Kapetanios
(2009) to investigate the time-series properties of energy
consumption in 50 US states from 1963 to 2009. SPSM involves the
classification of the entire panel into a group of stationary series and
a group of non-stationary series to identify how many and which
series in the panel are stationary processes. Empirical results obtained
through SPSM with the panel KSS unit root test developed by Ucar
and Omay (2009) combined with a Fourier function indicate that
energy consumption in all the 50 US states are stationary. The results
of this study have important policy implications for the 50 US states.
<p>[1] Agnolucci, P., Barker, T., Ekins, P. (2004). Hysteresis and energy
demand: The announcement effects and the effects of the UK climate
change levy. Tyndall Centre for Climate Change Research, Working
Paper no: 51, June 2004, UK.
[2] Apergis, N. and Payne J. (2010). The Renewable Energy Consumption-
Growth nexus in Central America, Applied Energy, 88, 343-347.
[3] Bai, J. and Ng, S. (2004). A PANIC attack on unit roots and
cointegration, Econometrica, 72, 1127-1177.
[4] Becker, R., Enders, W., and Lee, J. (2004). A general test for time
dependence in parameters, Journal of Applied Econometrics, 19, 899-
906.
[5] Breuer, J.B., McNown, R., Wallace, M.S. (2001). Misleading inferences
from panel unit-root tests with an illustration from purchasing power
parity, Review of International Economics, 9, 482-493.
[6] Breuer, J. B., McNown, R., and Wallace, M.S. (2002). Series-specific
unit-root tests with panel data, Oxford Bulletin of Economics and
Statistics, 64, 527-546.
[7] Carrion-i-Silvestre, J. L., Del Barrio-Castro, T., Lopez-Bazo, E. (2005).
Breaking the panels: An application to GDP per capita, Econometrics
Journal, 8, 159-175.
[8] Chen, P. F., and Lee, C.C. (2007). Is energy consumption per capita
broken stationary? New evidence from regional-based panels, Energy
Policy, 35 (6), 3526-354.
[9] Choi, I. (2002). Combination unit root tests for cross-sectionally
correlated Panels, mimeo, Hong Kong University of Science and
Technology.
[10] Chortareas, G. and Kapetanios, G. (2009). Getting PPP right:
Identifying mean-reverting real exchange rates in panels, Journal of
Banking and Finance, 33, 390-404.
[11] Dickey, D. A. and Fuller, W. A. (1981). Likelihood Ratio Statistic for
Autoregressive Time Series with a Unit Root, Econometrica, 49(4),
1057-1072.
[12] Enders, W. and Lee, J. (2011). A unit root test using a Fourier series to
approximate smooth breaks, Oxford Bulletin of Economics and
Statistics, 0305-9049 doi: 10.1111/j.1468-0084.2011.00662.x.
[13] Gabreyohannes, E. (2010). A nonlinear approach to modeling the
residential electricity consumption in Ethiopia, Energy Economics, 32,
515-523.
[14] Gallant, R. (1981). On the basis in flexible functional form and an
essentially unbiased form: The flexible Fourier form. Journal of
Econometrics, 15:211-353.
[15] Granger, C. W. J., and Terasvirta, T. (1993). Modelling Nonlinear
Economic Relationships, Advanced Texts in Econometrics, Oxford
University Press, New York.
[16] Hamilton, J. D. (2003). What is an oil shock? Journal of Econometrics,
113, 363-398.
[17] Hasanvov, M and Telatar, E. (2011). A re-examination of stationarity of
energy consumption: Evidence from new unit root tests, Energy Policy,
39, 7726-7738.
[18] Huang, B. N., Hwang, M. J., and Yang, C. W. (2008). Does more
energy consumption bolster economic growth? An application of the
nonlinear threshold regression model, Energy Policy, 36, 755-767.
[19] Hsu, Y.C., Lee, C.C., and Lee, C.C. (2008). Revisited: Are shocks to
energy consumption permanent or stationary? New evidence from a
panel SURADF approach, Energy Economics, 30, 2314-2330.
[20] Im, K.-S., Pesaran, H., and Shin, Y. (2003). Testing for unit roots in
heterogeneous panels, Journal of Econometrics, 115, 53-74.
[21] Kapetanios, G., Shin, Y., and Snell, A. (2003). Testing for a unit root in
the nonlinear STAR framework, Journal of Econometrics, 112, 359-379.
[22] Kwiatkowski, D., Phillips, P., Schmidt, P., and Shin, Y (1992). Testing
the null hypothesis of stationarity against the alternative of a unit root:
How sure are we that economic time series have a unit root? Journal of
Econometrics, 54, 159-178.
[23] Lee, C. C., (2005). Energy consumption and GDP in developing
countries: A cointegrated panel analysis, Energy Economics, 27, 415-
427.
[24] Levin, A., Lin, C. F. and Chu, C.-S. (2002). Unit root in panel data:
asymptotic and finite-sample properties, Journal of Econometrics, 108,
1-24.
[25] Lundbergh, S., Terasvirta, T., and van Dijk, D. (2003). Time-varying
smooth transition autoregressive models, Journal of Business and
Economic Statistics, 21, 104-121.
[26] Maddala, G. S. and Wu, S. (1999). A comparative study of unit root
tests with panel data and a new simple test, Oxford Bulletin of
Economics and Statistics. Special Issue, 631-652.
[27] Mishra, R., Sharma, S., and Smyth, R. (2009). Are fluctuations in
energy consumption per capita transitory? Evidence from a panel of
Pacific Island countries, Energy Policy, 37, 2318-2326.
[28] Moon, R. and Perron, B. (2004). Testing for a unit root in panels with
dynamic factors, Journal of Econometrics, 122, 81-126.
[29] Narayan, P. K., and Smyth, R. (2007). Are shocks to energy
consumption permanent or temporary? Evidence from 182 countries,
Energy Policy, 35(1), 333-341.
[30] Nelson, C. and Plosser, C. (1982). Trends and random walks in
macroeconomic time Series, Journal of Monetary Economics, 10, 139-
162.
[31] Newey, W., and West, K. (1994). Automatic lag selection in covariance
matrix estimation, Review of Economic Studies, 61, 631-653.
[32] O’Connell, P. G. J. (1998). The overvaluation of purchasing power
parity, Journal of International Economics, 44, 1-20.
[33] Ozturk, I. (2010). A literature survey on energy-growth nexus, Energy
Policy, 38, 340-349.
[34] Pascalau, R. (2010). Unit root tests with smooth breaks: An application
to the Nelson-Plosser data set, Applied Economics Letters, 17, 565-570.
[35] Payne, J. E. 2010. Survey of the international evidence on the causal
relationship between energy consumption and growth, Journal of
Economic Studies, 37(1), 53-95.
[36] Perron, P. (1989). The great crash, the oil price shock, and the unit root
hypothesis, Econometrica, 57, 1361-1401.
[37] Pesaran, M. H. (2007). A simple panel unit root test in the presence of
cross-section dependence, Journal of Applied Econometrics, 22, 265-
312.
[38] Phillips, P. C. B. and P. Perron (1988). Testing for a unit root in time
series regression, Biometrika, 75, 335-346.
[39] Sollis, R. (2004). Asymmetric adjustment and smooth transitions: A
combination of some unit root tests, Journal of Time Series Analysis,
25, 409-417.
[40] Soytas, U. and Sari, R. (2003). Energy consumption and GDP: Causality
relationship in G-7 countries and emerging markets, Energy Economics,
25, 33-37.
[41] Taylor, M. and Sarno, L. (1998). The behavior of real exchanges rates
during the post-Bretton Woods period, Journal of International
Economics, 46, 281-312.
[42] Taylor, A. M. and Taylor, M. P. (2004). The purchasing power parity
debate, Journal of Economic Perspectives, 18, 135-158.
[43] Telatar, E., and Hasanov, M. (2009). Purchasing Power Parity in
transition economies: Evidence from the Common wealth of
Independent States, Post-Communist Economies, 21, 157-173.
[44] Ucar, N. and Omay, T. (2009). Testing for unit root in nonlinear
heterogeneous panels, Economics Letters, 104, 5-8.</p>
<p>[1] Agnolucci, P., Barker, T., Ekins, P. (2004). Hysteresis and energy
demand: The announcement effects and the effects of the UK climate
change levy. Tyndall Centre for Climate Change Research, Working
Paper no: 51, June 2004, UK.
[2] Apergis, N. and Payne J. (2010). The Renewable Energy Consumption-
Growth nexus in Central America, Applied Energy, 88, 343-347.
[3] Bai, J. and Ng, S. (2004). A PANIC attack on unit roots and
cointegration, Econometrica, 72, 1127-1177.
[4] Becker, R., Enders, W., and Lee, J. (2004). A general test for time
dependence in parameters, Journal of Applied Econometrics, 19, 899-
906.
[5] Breuer, J.B., McNown, R., Wallace, M.S. (2001). Misleading inferences
from panel unit-root tests with an illustration from purchasing power
parity, Review of International Economics, 9, 482-493.
[6] Breuer, J. B., McNown, R., and Wallace, M.S. (2002). Series-specific
unit-root tests with panel data, Oxford Bulletin of Economics and
Statistics, 64, 527-546.
[7] Carrion-i-Silvestre, J. L., Del Barrio-Castro, T., Lopez-Bazo, E. (2005).
Breaking the panels: An application to GDP per capita, Econometrics
Journal, 8, 159-175.
[8] Chen, P. F., and Lee, C.C. (2007). Is energy consumption per capita
broken stationary? New evidence from regional-based panels, Energy
Policy, 35 (6), 3526-354.
[9] Choi, I. (2002). Combination unit root tests for cross-sectionally
correlated Panels, mimeo, Hong Kong University of Science and
Technology.
[10] Chortareas, G. and Kapetanios, G. (2009). Getting PPP right:
Identifying mean-reverting real exchange rates in panels, Journal of
Banking and Finance, 33, 390-404.
[11] Dickey, D. A. and Fuller, W. A. (1981). Likelihood Ratio Statistic for
Autoregressive Time Series with a Unit Root, Econometrica, 49(4),
1057-1072.
[12] Enders, W. and Lee, J. (2011). A unit root test using a Fourier series to
approximate smooth breaks, Oxford Bulletin of Economics and
Statistics, 0305-9049 doi: 10.1111/j.1468-0084.2011.00662.x.
[13] Gabreyohannes, E. (2010). A nonlinear approach to modeling the
residential electricity consumption in Ethiopia, Energy Economics, 32,
515-523.
[14] Gallant, R. (1981). On the basis in flexible functional form and an
essentially unbiased form: The flexible Fourier form. Journal of
Econometrics, 15:211-353.
[15] Granger, C. W. J., and Terasvirta, T. (1993). Modelling Nonlinear
Economic Relationships, Advanced Texts in Econometrics, Oxford
University Press, New York.
[16] Hamilton, J. D. (2003). What is an oil shock? Journal of Econometrics,
113, 363-398.
[17] Hasanvov, M and Telatar, E. (2011). A re-examination of stationarity of
energy consumption: Evidence from new unit root tests, Energy Policy,
39, 7726-7738.
[18] Huang, B. N., Hwang, M. J., and Yang, C. W. (2008). Does more
energy consumption bolster economic growth? An application of the
nonlinear threshold regression model, Energy Policy, 36, 755-767.
[19] Hsu, Y.C., Lee, C.C., and Lee, C.C. (2008). Revisited: Are shocks to
energy consumption permanent or stationary? New evidence from a
panel SURADF approach, Energy Economics, 30, 2314-2330.
[20] Im, K.-S., Pesaran, H., and Shin, Y. (2003). Testing for unit roots in
heterogeneous panels, Journal of Econometrics, 115, 53-74.
[21] Kapetanios, G., Shin, Y., and Snell, A. (2003). Testing for a unit root in
the nonlinear STAR framework, Journal of Econometrics, 112, 359-379.
[22] Kwiatkowski, D., Phillips, P., Schmidt, P., and Shin, Y (1992). Testing
the null hypothesis of stationarity against the alternative of a unit root:
How sure are we that economic time series have a unit root? Journal of
Econometrics, 54, 159-178.
[23] Lee, C. C., (2005). Energy consumption and GDP in developing
countries: A cointegrated panel analysis, Energy Economics, 27, 415-
427.
[24] Levin, A., Lin, C. F. and Chu, C.-S. (2002). Unit root in panel data:
asymptotic and finite-sample properties, Journal of Econometrics, 108,
1-24.
[25] Lundbergh, S., Terasvirta, T., and van Dijk, D. (2003). Time-varying
smooth transition autoregressive models, Journal of Business and
Economic Statistics, 21, 104-121.
[26] Maddala, G. S. and Wu, S. (1999). A comparative study of unit root
tests with panel data and a new simple test, Oxford Bulletin of
Economics and Statistics. Special Issue, 631-652.
[27] Mishra, R., Sharma, S., and Smyth, R. (2009). Are fluctuations in
energy consumption per capita transitory? Evidence from a panel of
Pacific Island countries, Energy Policy, 37, 2318-2326.
[28] Moon, R. and Perron, B. (2004). Testing for a unit root in panels with
dynamic factors, Journal of Econometrics, 122, 81-126.
[29] Narayan, P. K., and Smyth, R. (2007). Are shocks to energy
consumption permanent or temporary? Evidence from 182 countries,
Energy Policy, 35(1), 333-341.
[30] Nelson, C. and Plosser, C. (1982). Trends and random walks in
macroeconomic time Series, Journal of Monetary Economics, 10, 139-
162.
[31] Newey, W., and West, K. (1994). Automatic lag selection in covariance
matrix estimation, Review of Economic Studies, 61, 631-653.
[32] O’Connell, P. G. J. (1998). The overvaluation of purchasing power
parity, Journal of International Economics, 44, 1-20.
[33] Ozturk, I. (2010). A literature survey on energy-growth nexus, Energy
Policy, 38, 340-349.
[34] Pascalau, R. (2010). Unit root tests with smooth breaks: An application
to the Nelson-Plosser data set, Applied Economics Letters, 17, 565-570.
[35] Payne, J. E. 2010. Survey of the international evidence on the causal
relationship between energy consumption and growth, Journal of
Economic Studies, 37(1), 53-95.
[36] Perron, P. (1989). The great crash, the oil price shock, and the unit root
hypothesis, Econometrica, 57, 1361-1401.
[37] Pesaran, M. H. (2007). A simple panel unit root test in the presence of
cross-section dependence, Journal of Applied Econometrics, 22, 265-
312.
[38] Phillips, P. C. B. and P. Perron (1988). Testing for a unit root in time
series regression, Biometrika, 75, 335-346.
[39] Sollis, R. (2004). Asymmetric adjustment and smooth transitions: A
combination of some unit root tests, Journal of Time Series Analysis,
25, 409-417.
[40] Soytas, U. and Sari, R. (2003). Energy consumption and GDP: Causality
relationship in G-7 countries and emerging markets, Energy Economics,
25, 33-37.
[41] Taylor, M. and Sarno, L. (1998). The behavior of real exchanges rates
during the post-Bretton Woods period, Journal of International
Economics, 46, 281-312.
[42] Taylor, A. M. and Taylor, M. P. (2004). The purchasing power parity
debate, Journal of Economic Perspectives, 18, 135-158.
[43] Telatar, E., and Hasanov, M. (2009). Purchasing Power Parity in
transition economies: Evidence from the Common wealth of
Independent States, Post-Communist Economies, 21, 157-173.
[44] Ucar, N. and Omay, T. (2009). Testing for unit root in nonlinear
heterogeneous panels, Economics Letters, 104, 5-8.</p>
@article{"International Journal of Engineering, Mathematical and Physical Sciences:52005", author = "Wen-Chi Liu", title = "The Study on the Stationarity of Energy Consumption in US States: Considering Structural Breaks, Nonlinearity, and Cross- Sectional Dependency", abstract = "This study applies the sequential panel selection
method (SPSM) procedure proposed by Chortareas and Kapetanios
(2009) to investigate the time-series properties of energy
consumption in 50 US states from 1963 to 2009. SPSM involves the
classification of the entire panel into a group of stationary series and
a group of non-stationary series to identify how many and which
series in the panel are stationary processes. Empirical results obtained
through SPSM with the panel KSS unit root test developed by Ucar
and Omay (2009) combined with a Fourier function indicate that
energy consumption in all the 50 US states are stationary. The results
of this study have important policy implications for the 50 US states.
", keywords = "Energy Consumption, Panel Unit Root, Sequential
Panel Selection Method, Fourier Function, US states.", volume = "7", number = "8", pages = "1242-21", }
