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Steel consumption and economic activity in the UK: The integration and cointegration debate

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  • Evans, Mark

Abstract

This research examines whether a long-run stationary equilibrium relationship holds between economic activity and the consumption of crude steel within the UK. Using the theory of fractionally integrated and cointegrated processes, and allowing for the possibility that the equilibrium path changes abruptly at occasional points in time, it is possible to determine if steel consumption and economic activity follow a common stochastic trend or whether the two series randomly drift apart over time. Evidence is found to support such a long term relationship. This result is at odds with the conclusions drawn by previous researchers in the area. The reason for this difference may be due to these researchers concentrating only on I(0) and I(1) specifications, without consideration of fractional possibilities and also to a failure to account for structural breaks in the equilibrium relationship. Such conclusions are made within the framework of the ARFIMA methodology that yields reliable inferences on the degree of fractional integration and cointegration. Critical values for fractional contegration with an ARFIMA model in the presence of structural breaks are also derived in this paper.

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  • Evans, Mark, 2011. "Steel consumption and economic activity in the UK: The integration and cointegration debate," Resources Policy, Elsevier, vol. 36(2), pages 97-106, June.
    • Handle: RePEc:eee:jrpoli:v:36:y:2011:i:2:p:97-106
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    1. Cerasa, Andrea & Buscaglia, Daniela, 2019. "A hedonic model of import steel prices: Is the EU market integrated?," Resources Policy, Elsevier, vol. 61(C), pages 241-249.
    2. Mario Coccia, 2012. "Dynamics of the steel and long-term equilibrium hypothesis across leading geo-economic players: empirical evidence for supporting a policy formulation," CERIS Working Paper 201202, CNR-IRCrES Research Institute on Sustainable Economic Growth - Torino (TO) ITALY - former Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY.
    3. Mariia Ostapchuk & Claire Auplat & Pierre Boucard, 2023. "Economic Growth and Scientific Knowledge as Determinants of Innovation Uptake in a Situation of Uncertainty About Environmental or Health Risk," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(2), pages 1602-1634, June.
    4. Crompton, Paul, 2015. "Explaining variation in steel consumption in the OECD," Resources Policy, Elsevier, vol. 45(C), pages 239-246.
    5. Torbat, Sheida & Khashei, Mehdi & Bijari, Mehdi, 2018. "A hybrid probabilistic fuzzy ARIMA model for consumption forecasting in commodity markets," Economic Analysis and Policy, Elsevier, vol. 58(C), pages 22-31.
    6. Zhongxin Ni & Xing Lu & Wenjun Xue, 2021. "Does the belt and road initiative resolve the steel overcapacity in China? Evidence from a dynamic model averaging approach," Empirical Economics, Springer, vol. 61(1), pages 279-307, July.
    7. Hossein Kamalzadeh & Saeid Nassim Sobhan & Azam Boskabadi & Mohsen Hatami & Amin Gharehyakheh, 2019. "Modeling and Prediction of Iran's Steel Consumption Based on Economic Activity Using Support Vector Machines," Papers 1912.02373, arXiv.org.

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