The impact of energy demand management policies on energy consumption: Evidence from Nonlinear and Structural Break Tests

Document Type : Original Article

Authors

1 Ph.D Student, Department of Economics, Institute for Management and Planning, Tehran, Iran

2 Assistant professor, Department of economics, Urmia University, Urmia, Iran

3 Ph.D Student, Department of Economics, Institute for Management and Planning,Tehran, Iran

4 PhD student in monetary economics Faculty of economics and politics Shahid beheshti University,Tehran, Iran

Abstract

The main objective of this study is to answer this important and basic question whether demand management policies can affect the energy consumption in Iran economy or not? Energy consumption management policies will be effective only if the energy consumption time series contains a unit root or in other words if it is nonstationary. The main problem with conventional unit root tests like ADF, … is that when there is a structural break or nonlinearities like asymmetric adjustment in the underlying series these tests can result in incorrect results. Consequently, in this paper instead of conventional tests like ADF we have used three alternative tests including Zivot and Andrews (1992), Lee and Strazicich (2003) and Kapetanios et al. (2003). The first two, incorporate structural break in unit root test and the latter assumes nonlinear exponential smooth transition autoregressive (ESTAR) process as an alternative in the unit root test. In this paper we have used annual data for per capita energy consumption (in Residential, Industry, Transportation, Agriculture sectors and overall economy) over the 1967-2016 period. The results show that the energy consumption in Residential sector is stationary which means that the energy consumption management policies have no permanent effect on energy consumption in this sector. On the other hand, based on ZA, LS and ESTAR test results, the energy consumption in the Industry, Transportation, Agriculture sectors and overall economy are all nonstationary and shocks to energy consumption have longrun and permanent effect in these sectors.

Keywords

References

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