Unit Root Properties of Energy Consumption and Production in Turkey

Abstract

In this study, unit root properties of total and sectorial energy production and consumption series of Turkey are investigated. This study is the first to investigate unit root properties of Turkish energy production. The unit root null hypothesis for energy variables are tested by using unit root tests based on LM considering without structural break and with one and two structural breaks. The results of the unit root test without structural break show that the unit root hypothesis is rejected only for consumption of natural gas. The unit root hypothesis is rejected for 15 out of the 33 series by the LS test with one structural break. When two structural breaks are taken into account, 25 out of the 33 series are found to be stationary around a deterministic trend. The production of hydraulic and the consumption of lignite, electricity, petroleum, coal and electricity, total energy and petroleum consumption in Transportation sector are found to be non-stationary, which indicates that the impacts of innovations on these variables will be permanent. The policy implication of the results suggests that the impacts of shocks on energy consumption and production will be temporary and not have a long memory for most of variables. Keywords: unit root, energy production, energy consumption, structural break, Turkey