Abstract:
The main objective of this study is to answer this important and basic question whether demand management policies can affect the energy consumption in Iran economy or not? Energy consumption management policies will be effective only if the energy consumption time series contains a unit root or in other words if it is nonstationary. The main problem with conventional unit root tests like ADF, … is that when there is a structural break or nonlinearities like asymmetric adjustment in the underlying series these tests can result in incorrect results. Consequently, in this paper instead of conventional tests like ADF we have used three alternative tests including Zivot and Andrews (1992), Lee and Strazicich (2003) and Kapetanios et al. (2003). The first two, incorporate structural break in unit root test and the latter assumes nonlinear exponential smooth transition autoregressive (ESTAR) process as an alternative in the unit root test. In this paper we have used annual data for per capita energy consumption (in Residential, Industry, Transportation, Agriculture sectors and overall economy) over the 1967-2016 period. The results show that the energy consumption in Residential sector is stationary which means that the energy consumption management policies have no permanent effect on energy consumption in this sector. On the other hand, based on ZA, LS and ESTAR test results, the energy consumption in the Industry, Transportation, Agriculture sectors and overall economy are all nonstationary and shocks to energy consumption have longrun and permanent effect in these sectors.
Machine summary:
Evidence from non-linear and structural break tests Siavash Mohammadpoor ** Ali Rezazadeh *** Mehdi Mehranfar **** Alireza Khazaei 1 Abstract The main objective of this study is to answer the fundamental question of whether energy demand management policies can control energy consumption in the economy of Iran or not?
The results of the Lee-Strazicich unit root test, which accounts for two structural breaks in the unit root test, show that per capita energy consumption in the household sector is stationary (meaning demand management policy is ineffective in the long term).
Empirical studies regarding the investigation of energy consumption stationarity (Application of linear unit root tests) Authors ; Study area ; Time period ; Data frequency ; Method(s) ; Results Masih and Masih (1996); 6 East Asian countries ; 1955-1990; Annual; ADF and PP unit root tests; Non-stationary Cheng and Lai 1 (1997); Taiwan; 1955-1993; Annual; PP unit root test; Non-stationary Chen and Li (1997); China; 1953-1994; Annual; ADF unit root test; Non-stationary Asafu-Adjaye 2 (2000); 4 East Asian countries; 1971-1995; Annual; ADF and PP unit root tests; Non-stationary Soytas and Sari 3 (2003); G7 countries; 1950-1994; Annual; DF, ADF, and PP unit root tests; Non-stationary Narayan and Smyth; 182 countries; 1979-2000; Annual; Unit root tests; Stationary 1.
Empirical studies regarding the investigation of energy consumption stationarity (Application of non-linear unit root tests) Authors ; Study area ; Time period ; Data frequency ; Method(s) ; Results Altinay and Karagol 7 (2004); Turkey; 1950-2000; Annual; Zivot-Andrews unit root test; Stationary Chen and Li (2007); 7 regions including 104 countries; 1971-2002; Annual; Panel unit root tests considering structural breaks; Stationary Narayan et al.
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