Are fluctuations in energy consumption transitory or permanent? Evidence from a Fourier LM unit root test

Abstract

In this study, we employ a recently introduced unit root test with a Fourier function that is capable of capturing the unknown nature of structural breaks, to reexamine the stationarity properties of energy consumption per capita of 109 countries over the period 1960-2011. The results of the Fourier Lagrange Multiplier unit root test show that the energy consumption per capita for Algeria, Australia, Benin, Bolivia, Canada, Costa Rica, Denmark, Egypt, Greece, Guatemala, Hong Kong, Ireland, Jordan, Korea Democratic Republic, Mexico, Myanmar, The Netherlands, New Zealand, Oman, Paraguay, Qatar, Singapore, Tanzania, The United States and Vietnam is stationary, indicating that energy demand management policies will not be effective on energy consumption in the long term. In addition to this, since the energy consumption in these countries does not contain a unit root, future movements in energy consumption can be predicted by employing historical behaviors. (C) 2014 Elsevier Ltd. All rights reserved.