Does Total Energy Consumption and Share of Renewables in Energy Consumption Show Long Memory Under Sharp and Smooth Structural Changes?


Tanrıverdi S., Yıldırım Kasap D.

MIC 2022 Management International Conference, Ljubljana, Slovenia, 9 - 11 June 2022, pp.149

  • Publication Type: Conference Paper / Summary Text
  • City: Ljubljana
  • Country: Slovenia
  • Page Numbers: pp.149

Abstract

This study aims to analyze the long memory properties of total energy consumption and share of clean energy (nuclear and renewables) in total energy consumption for ten IEA member countries over the period 1800-2008. Considering that changes in regulatory policies, implementation of new environmental laws, and potential market stabilities arising from some major events might result in structural breaks in the series, we employ a methodology that accounts for those breaks. In that sense, unlike the existing studies, our study allows for smooth and instant breaks together, intending to capture the correct functional form of the breaks since we are aware of the fact that the consequences of misspecification of the functional form of the breaks are as severe as those of ignoring the breaks. To account for the sign and size asymmetry of responses of the series, which might arise from the breakeven between adjustment costs and the burden of the shock, we further utilize Quantile Unit Root procedures. By considering all factors affecting the stochastic properties of the series, we aim to provide reliable inferences regarding the long memory property of total and clean energy consumption, which will help policy-makers to better design and drive their policy objectives.