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The impact of biomass, geothermal and hydroelectric energy consumption on industrial production: A threshold cointegration model with regime shifts

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  • Bilgili, Faik
  • Doğan, İbrahim
  • H. Tülüce, Nadide
  • Kuşkaya, Sevda

Abstract

This paper aims at estimating the impact of total renewable energy consumption and its components on industrial production. Paper launches the data of industrial production, total biomass energy consumption, hydroelectric energy consumption, geothermal energy consumption and total renewable energy consumption for US for the period January, 1974 - January, 2012. Paper, then, following the growth rate of the data, employs nonlinear cointegration vector and nonlinear vector error correction model (VECM) through regime shifts. In estimation algorithm, all coefficients, except cointegration vector, are allowed to shift from one regime to another. Finally paper reveals that (i) total biomass energy consumption and industrial production and (ii) geothermal energy consumption and industrial production are significantly cointegrated and, that, on the other hand, (iii) hydroelectric energy consumption and industrial production, (iv) total renewable energy consumption and industrial production do not follow cointegrating path, and (v) VECM’s second regimes need larger adjustments in order for industrial growth to reach its long run equilibriums with growths of biomass and geothermal consumption.

Suggested Citation

  • Bilgili, Faik & Doğan, İbrahim & H. Tülüce, Nadide & Kuşkaya, Sevda, 2014. "The impact of biomass, geothermal and hydroelectric energy consumption on industrial production: A threshold cointegration model with regime shifts," MPRA Paper 90168, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:90168
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    Keywords

    biomass energy consumption; geothermal energy consumption; hydroelectric energy consumption; industrial production; threshold cointegration and VECM;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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