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Common Trends and Country Specific Heterogeneities in Long-Run World Energy Consumption

Author

Listed:
  • Yoosoon Chang

    (Indiana University)

  • Yongok Choi

    (Chung-Ang University)

  • Chang Sik Kim

    (Sungkyunkwan University)

  • J. Isaac Miller

    (University of Missouri)

  • Joon Y. Park

    (Indiana University)

Abstract
We employ a semiparametric functional coefficient panel approach to allow an economic relationship of interest to have both country-specific heterogeneity and a common component that may be nonlinear in the covariate and may vary over time. Surfaces of the common component of coefficients and partial derivatives (elasticities) are estimated and then decomposed by functional principal components, and we introduce a bootstrap-based procedure for inference on the loadings of the functional principal components. Applying this approach to national energy-GDP elasticities, we find that elasticities are driven by common components that are distinct across two groups of countries yet have leading functional principal components that share similarities. The groups roughly correspond to OECD and non-OECD countries, but we utilize a novel methodology to regroup countries based on common energy consumption patterns to minimize root mean squared error within groups. The common component of the group containing more developed countries has an additional functional principal component that decreases the elasticity of the wealthiest countries in recent decades.

Suggested Citation

  • Yoosoon Chang & Yongok Choi & Chang Sik Kim & J. Isaac Miller & Joon Y. Park, 2024. "Common Trends and Country Specific Heterogeneities in Long-Run World Energy Consumption," CAEPR Working Papers 2024-001 Classification-1, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    • Handle: RePEc:inu:caeprp:2024001
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    More about this item

    Keywords

    energy consumption; energy-GDP elasticity; partially linear semiparametric panel model; functional coefficient panel model;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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