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Modeling OECD energy demand: An international panel smooth transition error-correction model

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  • Lee, Chien-Chiang
  • Chiu, Yi-Bin

Abstract

This study is the first to apply a newly developed panel smooth transition regression model with the error-correction term (PSECM) to estimate the non-linear relationship among energy consumption, real income and real energy prices for 24 OECD countries. Unlike the existing literature on non-linear estimation, we consider five “candidates” for the threshold variable including per capita real GDP, real energy prices, energy intensity, the ratio of gross capital formation to GDP, and error-correction term to explore which threshold variable is suitable for the non-linear energy demand model. Our empirical results demonstrate that energy consumption, real income and real energy prices can be cointegrated, and are in favor of the non-linearity for energy demand when the energy intensity and the ratio of gross capital formation to GDP are considered as the threshold variables. Furthermore, the results indicate that the adjustment speed toward long-run equilibrium of PSECM is small and approximately 7–17% in 1year.

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  • Lee, Chien-Chiang & Chiu, Yi-Bin, 2013. "Modeling OECD energy demand: An international panel smooth transition error-correction model," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 372-383.
  • Handle: RePEc:eee:reveco:v:25:y:2013:i:c:p:372-383
    DOI: 10.1016/j.iref.2012.08.002
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    Cited by:

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    2. Nawaz, Saima & Iqbal, Nasir & Anwar, Saba, 2014. "Modelling electricity demand using the STAR (Smooth Transition Auto-Regressive) model in Pakistan," Energy, Elsevier, vol. 78(C), pages 535-542.
    3. Xiaosheng Li & Xia Yan & Qingxian An & Ke Chen & Zhen Shen, 2016. "The coordination between China’s economic growth and environmental emission from the Environmental Kuznets Curve viewpoint," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 83(1), pages 233-252, August.
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    5. Sohag, Kazi & Begum, Rawshan Ara & Abdullah, Sharifah Mastura Syed & Jaafar, Mokhtar, 2015. "Dynamics of energy use, technological innovation, economic growth and trade openness in Malaysia," Energy, Elsevier, vol. 90(P2), pages 1497-1507.
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    More about this item

    Keywords

    Energy consumption; Non-linearity; Panel smooth transition regression; Economic growth;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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