Is per capita electricity consumption stationary? Time series evidence from OECD countries

Abstract

This study examines the stationary properties of per capita electricity consumption in which the endogenously determined break points are incorporated in 23 high income OECD countries by using annual data over 1960-2005 period. We utilize Lagrange Multiplier (LM) unit root test that endogenously determines structural breaks in level and/or trend. We find that 21 country series reject the unit root null hypothesis at the 5% significance level, except for 2 country series. Thus, our empirical findings provide significant evidence that per capita electricity consumption is stationary in almost all countries considered in the study. The stationarity of per capita electricity consumption indicates that it should be possible for the series to forecast future movements in the energy consumption based on the past behaviors of the series. Important policy implications emerge from our empirical results of the unit root test with multiple structural breaks.