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Does final energy consumption in Portugal exhibit long memory?

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  • José Manuel Belbute

    () (Department of Economics, University of Évora, Portugal Center for Advanced Studies in Management and Economics - CEFAGE, Portugal)

Abstract

In this paper we measure the degree of fractional integration in final energy demand in Portugal using an ARFIMA model. Our findings suggest the presence of long memory in aggregate and disaggregate energy demand in Portugal. All fractional-difference parameters are positive and lower than 0.5 indicating that the series are stationary, although the mean reversion process will be slower than in the typical short run processes. In addition, our findings also indicate that there is clear seasonal long memory evidence for all the Portuguese components of final energy demand. These results have important implication for the design of environmental policies. First, despite the effects of a policy shock on energy consumption will tend to disappear slowly, they preserve their temporary nature. This is good news for the success of the Portuguese green tax reform since fiscal neutrality may be achieved earlier and cause temporary budget imbalances for a smaller period. Second, given the temporary nature of the effects of the policy shock, long lasting effects on the final energy consumption will be achieved by means of a more permanent policy stance.

Suggested Citation

  • José Manuel Belbute, 2015. "Does final energy consumption in Portugal exhibit long memory?," CEFAGE-UE Working Papers 2015_04, University of Evora, CEFAGE-UE (Portugal).
  • Handle: RePEc:cfe:wpcefa:2015_04
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    File URL: http://www.cefage.uevora.pt/en/content/download/5479/64238/version/1/file/2015_04.pdf
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    References listed on IDEAS

    as
    1. Sowell, Fallaw, 1992. "Maximum likelihood estimation of stationary univariate fractionally integrated time series models," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 165-188.
    2. Kumar Narayan, Paresh & Smyth, Russell, 2007. "Are shocks to energy consumption permanent or temporary? Evidence from 182 countries," Energy Policy, Elsevier, vol. 35(1), pages 333-341, January.
    3. Sowell, Fallaw, 1992. "Modeling long-run behavior with the fractional ARIMA model," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 277-302, April.
    4. Narayan, Paresh Kumar & Smyth, Russell, 2005. "Electricity consumption, employment and real income in Australia evidence from multivariate Granger causality tests," Energy Policy, Elsevier, vol. 33(9), pages 1109-1116, June.
    5. William R. Parke, 1999. "What Is Fractional Integration?," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 632-638, November.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Long memory; Final energy demand; Environmental policy; ARFIMA model; Portugal.;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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