Full Title: The Role of Globalization in Energy Consumption: A Quantile Cointegrating Regression Approach
Author(s): Muhammad Shahbaz, Amine Lahiani, Salah Abosedra, and Shawkat Hammoudeh
Publisher(s): Munich Personal RePEc Archive
Publication Date: February 1, 2018
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Description (excerpt):
This paper examines the quantile behavior of the relationship between the nuances of
globalization and energy consumption while incorporating capital and economic growth in case
of top-two most globalized countries – Netherlands and Ireland – by employing the recently
developed quantile autoregressive distributed lag (QARDL) model of Cho et al. (2015). The
model is estimated using quarterly data over the period 1970Q1-2015Q4. The results indicate
that the relationship is quantile-dependent, which may reveal misleading results in studies using
traditional analyses that address the averages. The Wald test confirms our findings by rejecting
the null hypothesis of parameter constancy for both the Netherlands and Ireland. The changes in
energy consumption are more responsive to past levels and past changes in globalization than the
adjustment provided by the error-correction method (ECM). Interestingly, the findings indicate
that globalization is positively correlated with energy consumption in the long-term for the two
countries. Furthermore, globalization shares a robust long-term relationship with energy
consumption. Energy consumption is strongly related to globalization in the long-term. However,
the short-term effects of globalization on energy demand are limited for those countries.
Important policy implications are then suggested based on the empirical results.