Does Energy Consumption Nonstationary? New Evidence from a Panel SURADF Approach for 18 OECD Countries

In this study, we test the property of nonstationary in regard to the energy consumption for 18 OECD countries using the newly-developed panel SURADF tests of Breuer et al. (2001) for the period 1960-2002. While other panel-based unit root tests are joint tests of a unit root for all members of the panel and are incapable of determining the mix of the 1(0) and 1(1) series in the panel setting, the panel SURADF approach tests a separate unit-root null hypothesis for each individual panel member and, therefore identifies how many and which series in the panel are stationary processes. The property of nonstationary is confirmed for all the 18 OECD countries except Finland and Japan when Breuer et al.'s panel SURADF tests are conducted. In other words, any shock to the energy consumption has a permanent effect, thus shifting the energy consumption from one level to another. Should this be the case, from a policy perspective, a policy action is, indeed, required to return the energy consumption to its original level. Finally, as concerns major policy, the study implies that a fiscal stabilization policy would possibly have permanent effects on the energy consumption of these OECD countries.