The Role of Globalization in Energy Consumption: A Quantile Cointegrating Regression Approach

Transcription

1 MPRA Munch Personal RePEc Archve The Role of lobalzaon n Energy Consumpon: A Quanle Conegrang Regresson Approach Muhammad Shahbaz and Amne Lahan and Salah Abosedra and Shawka Hammoudeh Monpeller Busness School, Monpeller, France, LEO Unversy of Orléans, France, Amercan Unversy n he Emraes, Duba, UAE, Lebow College of Busness, Drexel Unversy, Uned Saes 2 February 28 Onlne a hps://mpra.ub.un-muenchen.de/84682/ MPRA Paper No , posed 2 February 28 8:57 UTC

2 The Role of lobalzaon n Energy Consumpon: A Quanle Conegrang Regresson Approach Muhammad Shahbaz Monpeller Busness School, Monpeller, France Emal: muhdshahbaz77@gmal.com Amne Lahan LEO Unversy of Orléans, France Monpeller Busness School, Monpeller, France Emal: amne.lahan@unv-orleans.fr Salah Abosedra College of Busness Admnsraon, Amercan Unversy n he Emraes, Duba, UAE. Emal: salaheddn.abosedra@lau.edu.lb Shawka Hammoudeh Lebow College of Busness, Drexel Unversy, Uned Saes Monpeller Busness School, Monpeller, France Emal: shawka.hammoudeh@drexel.edu Absrac: Ths paper examnes he uanle behavor of he relaonshp beween he nuances of globalzaon and energy consumpon whle ncorporang capal and economc growh n case of op-wo mos globalzed counres Neherlands and Ireland - by employng he recenly developed uanle auoregressve dsrbued lag QARDL model of Cho e al. 25. The model s esmaed usng uarerly daa over he perod 97Q-25Q4. The resuls ndcae ha he relaonshp s uanle-dependen, whch may reveal msleadng resuls n sudes usng radonal analyses ha address he averages. The Wald es confrms our fndngs by rejecng he null hypohess of parameer consancy for boh he Neherlands and Ireland. The changes n energy consumpon are more responsve o pas levels and pas changes n globalzaon han he adjusmen provded by he error-correcon mehod ECM. Ineresngly, he fndngs ndcae ha globalzaon s posvely correlaed wh energy consumpon n he long-erm for he wo counres. Furhermore, globalzaon shares a robus long-erm relaonshp wh energy consumpon. Energy consumpon s srongly relaed o globalzaon n he long-erm. However, he shor-erm effecs of globalzaon on energy demand are lmed for hose counres. Imporan polcy mplcaons are hen suggesed based on he emprcal resuls. JEL Classfcaon: F3, O, Q4 eywords: lobalzaon nuances, Energy Consumpon, Quanle ARDL.

3 . Inroducon Expers sae ha ol mpacs vrually every mporan secor of he economy. We can add ha he role of energy n he growh process has been mmensely mporan, parcularly snce he srong wnds of globalzaon began o blow n he early 98s. Ol s one global common pool, and energy producs, resources and ppelnes do cross counry borders ha have been enhanced by globalzaon. Over he pas hree decades, academcs have perssenly devoed a grea deal of me o sudyng he lnkage beween globalzaon and energy consumpon. The heorecal ene s sraghforward and very smple: as he world becomes more globalzed, oal energy consumpon wll change. However, hs change n energy consumpon can be ncreased or decreased dependng on he ne mpac of several facors among hem s globalzaon. The ncrease n he oal level of he world s economc oupu and he ncome assocaed wh globalzaon and he removal of rade barrers have been perceved o be pushng energy consumpon o hgher levels. Therefore, he expanson of globalzaon s usually assocaed wh an expanded use of energy due o he esablshed emprcal connecon beween economc growh and energy consumpon, whch has been observed n he exsng leraure. Bu hs fndng s debaable snce oher recen sudes n he leraure fnd a reverse effec of globalzaon on energy consumpon. For example, usng a panel of 25 counres, Shahbaz e al. 27 fnd ha globalzaon s posvely lnked o energy consumpon n 2 counres, bu negavely lnked o energy consumpon n he USA and U. However, hose same auhors resuls show ha globalzaon does no nfluence energy consumpon n oher counres. In anoher sudy, Shahbaz e al. 26 repor ha acceleraon of globalzaon leads o a declne of energy demand n Inda. Supporng he favorable vew s he argumen ha rapdly growng exporng economes, such as Chna and Inda, have benefed from he shf n manufacurng away from he US,

4 Wesern Europe and oher developed counres o hese developng counres. The shf has resuled n more energy consumpon for hree reasons. Frs, even hough he energy nensy s showng a downward rend worldwde, however remans much hgher n Chna han ha n Inda, Europe or Norh Amerca lobal Energy Sascal Yearbook, 27. In fac, Chna accouns for a large par of he growh n he global energy demand. Second, he rules relaed o energy effcency and her envronmenal conseuences are looser n Chna and Inda han n developed counres. Conseuenly, globalzaon s beleved o have caused an expanson n global energy demand and an ncrease n he emssons of greenhouse gases, whch have negave conseuences on he envronmen. Thrd, as he ncome level of people n growng exporng economes ncreases, her level of energy consumpon wll also ncrease. However, he ncrease n ncome and expors proceeds wll ulmaely supplemen domesc capal sock, know-how and echnologcal spllovers for local ndusres n hese exporng economes. Ths mpac of globalzaon wll ake me o esablsh s nfluence bu wll evenually reduce energy consumpon per un of DP and lead o decreasng emssons of greenhouse gases, hus creang posve envronmenal conseuences n he long-erm. Consderng ha he servce secors n he U.S., Wesern Europe and oher developed counres are also mpaced by globalzaon, where many jobs are shfed from hese economes o developng counres, and consderng ha he consumpon of energy per un of DP n hs secor s lower han n oher secors, global energy consumpon wll lkely change because of hs shf. Based on hs narrave, we argue ha globalzaon.e., worldwde movemen oward economc, fnancal, rade, and communcaons negraon does no h all counres a he same hp://

5 me or a he same nensy; hus, here wll be globalzaon leaders and laggards over me, resulng n havng a varey of mos and leas globalzed counres. Moreover, globalzaon shfs beween counres cause changes n energy consumpon n he shor-erm and long-erm. Accordngly, he objecves of hs paper are hree-fold. The frs objecve s o acknowledge ha counres are no unformly globalzed; hus, s mporan o examne he lnks beween energy consumpon and globalzaon level n he mos globalzed counres o nvesgae he long-run and shor-run mpacs of globalzaon on energy consumpon. The second s o apply a mulvarae energy demand funcon by ncorporang economc growh and capal as addonal deermnans of energy consumpon. The hrd s o nvesgae he asymmerc uanles of energy consumpon and globalzaon n he shor-erm and long-erm, whch has relevance for developmen susanably for he wo mos globalzed counres we consder n hs paper, namely Ireland and he Neherlands. Ths sudy conrbues o he exsng leraure n hree ways. s a poneerng effor ha explores he relaonshp beween globalzaon and energy consumpon n he op wo globalzed economes.e. Ireland and he Neherlands n accordance wh he OF ndex of globalzaon globalzaon.kof.ehz.ch. 2 Several reasons ncenvze us o consder he op posons of Ireland and he Neherlands as he mos globalzed counres. Those wo counres have hghly open economes n erms of her corporae ax and FDI polces, expors and mpors. Frs, Ireland s sandard rae of corporaon ax s among he lowes n he world, sandng a 2.5%, compared for example o 35% for he Uned Saes. Second, he share of expors of goods and servces n DP ranks Ireland among he op 5 ou of 48 counres on he ls for 26. Second, Ireland s cenral locaon allows o be crossroads beween Norh 2 The wo op globalzed economes are Ireland and Neherlands.

6 Amerca and Asa. Thrd, alhough he orgnal language n Ireland s aelc, oday he Irsh people speak Englsh, he mos spoken language n he world. Ths has a double-advanage. Indeed, on he one hand, he Irsh czens can easly ravel and even work n a foregn counry. On he second hand, hs advanage could also be an ncenve for foregners o vs Ireland and se up busnesses o benef from s geographcal locaon, as hs counry acs as a connecor beween he USA and Asa, and from s membershp n he European Unon whch gves access o 5 mllon people n he EU marke. As regards he Neherlands, he counry has a cenral locaon n Europe. The Neherlands s a key dsrbuon locaon as menfesed by he volume of mpor and expor acvy. Almos 79% of he Duch expors reman whn Europe, parcularly Wesern Europe. The share of expors of goods and servces n he Duch DP s abou 32% n 23. The Neherlands Bureau for Economc Polcy Analyss esmaed ha expors accouned for almos half he counry's economc growh over he las wo decades. Ths counry also has a well-developed logscs nfrasrucure ha eases and ncreases he connecedness of companes locaed n he Neherlands wh he European marke. There s a vod n he leraure n hs respec, and hs paper s objecve s o fll and provde a more accurae and neresng analyss. Ths sudy nroduces locaon uanle asymmeres n he shor-erm and long-erm adjusmens beween globalzaon n dfferen varees and energy consumpon, usng he Quanle Auoregressve Dsrbued Lag QARDL model of Cho e al. 25. To our knowledge, hs approach s a relavely new addon o he leraure. By usng he QARDL approach, hs sudy ess he sably of he long-erm relaonshp across he uanles and provdes a more flexble economerc framework o examne

7 he lnks under consderaon. Compared o he lnear ARDL model, he QARDL model has he advanage of nroducng possble asymmeres n he reacon of energy consumpon o ncreases/decreases n globalzaon under dfferen gradaons. Mehodologcally, he QARDL model s superor o lnear models for a leas hree reasons. Frs, he model allows for locaonal asymmery, n ha he parameers may depend on he locaon of he dependen varable, energy consumpon, whn s condonal dsrbuon. Second, he QARDL model smulaneously addresses he long-erm relaonshp beween globalzaon and energy consumpon and s assocaed shor-erm dynamcs across a range of uanles of he condonal dsrbuon of energy consumpon. Thrd, conrary o hs sudy, ceran sudes fnd evdence of lack of conegraon beween hese me seres, usng radonal economerc echnues, such as he Johansen conegraon es and he lnear ARDL model. Ths negave oucome could be explaned by he exsence of uanle-varyng conegraon coeffcens over he shor-erm, alhough he varables connue o move ogeher n he longerm Xao, 29. The QARDL model also allows he conegrang coeffcen o vary over he nnovaon uanle, as caused by shocks. The QARDL model s also superor o oher nonlnear models, such as he Nonlnear Auoregressve Dsrbued Lag NARDL model Shn e al., 2, n whch nonlneary s exogenously defned snce he hreshold s se o zero nsead of beng deermned by a daa-drven process. Those reasons make he QARDL a suable canddae o more accuraely model boh he nonlnear and asymmerc lnkages beween globalzaon and energy consumpon n hose wo op globalzed counres 3. We fnd ha globalzaon and energy consumpon have a uanle conegraon or long-erm relaonshp n he long-erm n Ireland and Neherlands bu n he shor-erm globalzaon s found o no exer any nfluence on 3 Therefore, when comes o relang he process of globalzaon o he levels of energy consumpon, along wh smulaneously analyzng he ssue of urbanzaon and economc growh, here are only a few aemps made n he leraure for he world s economes n general and developng counres n parcular.

8 energy consumpon n boh counres. Energy consumpon s more responsve o s pas own adjusmen han o conemporaneous and pas varaons n globalzaon n he shor-erm. Ths emprcal evdence furher reveals ha, alhough nsgnfcanly, globalzaon affecs energy consumpon posvely n Ireland and negavely n he Neherlands. Several reasons could explan he asymmerc mpac of globalzaon on energy consumpon. Frs, hs mpac s due o he complexy of he economc sysems and he underlyng process drvng he dynamcs of he varables we consder n hs paper. Indeed, mos economc and fnancal varables show a nonlnear dynamc paern over me, whch conseuenly leads o a nonlnear and asymmerc neracon among hem. In parcular, globalzaon may nfluence energy consumpon hrough dfferen channels, such as economc growh, crses and polcal urmol. Indeed, recen years have seen he occurrence of several crses he Asan crss; he 2 nerne bubble; he 27 subprme crss; and he world global crss among ohers and several wars and errors aacks he frs and second ulf wars n and 23, respecvely; he Sepember, 2 aack; and he numerous errors aacks n several counres snce he brh of he Arab sprng. All he prevous facors conrbue o desablze he world s economc sysem, leadng o agens mobly beween counres and regons wh more mporan flows of refugees abandonng her home counres due o povery and polcal condons. Moreover, he world s polcal map s changng wh fewer physcal borders and more flexbly regardng he movemens of capal, echnology and people. The recen Brex n 26 s an applcable example of economc dsnegraon. Under he above condons, he muual nfluence beween he economc and fnancal varables s lkely o behave n asymmerc and nonlnear manners.

9 The remander of hs sudy s organzed as follows. Secon 2 revews he relaed leraure. Secon 3 dscusses he mehodology and daa collecon. Secon 4 dscusses he emprcal resuls. Secon 5 presens he concluson and polcy mplcaons. 2. Leraure revew Ths secon revews dfferen srands of he leraure by examnng globalzaon channels and he lnkages beween globalzaon and energy consumpon for developng, developed and mxed groupngs of counres and explorng new perspecves ha explan more varables of relevance o he relaonshp beween globalzaon and energy consumpon han wha s avalable n he exsng leraure. The curren leraure provdes an exposon of globalzaon channels, showng how globalzaon affecs energy consumpon. The frs channel s he scale effec, whch suggess ha globalzaon wll cause an ncrease n energy consumpon assocaed wh ncreases n he scale of economc acvy, holdng all oher facors consan Cole, 26. The second channel s he echnue effec, whch vews globalzaon as a facor empowerng economes o reduce energy consumpon by mporng new echnologes whou reducng he economc acvy level Anweler e al., 2; Dollar and raay, 24. The hrd channel s he composon effec of globalzaon on energy consumpon, whch suggess ha energy consumpon decreases as a resul of ncreases n economc acvy Sern, 27. More recenly, he lnkage beween energy consumpon and economc growh has expanded o explan he new developmens n he exsng leraure whch asser ha economc growh raes are sensve o ceran counry-specfc feaures, ncludng he level of urbanzaon, he degree of economc openness, he degree of economc and polcal sably, regulaory

10 reforms, he degree of a counry s globalzaon, and he mpac of economc growh on a counry s envronmen Shahbaz e al., 25. Therefore, globalzaon s added as an addonal varable n he explanaon of economc growh. Varous proxes measurng globalzaon, such as expors, mpors, rade, and rade lberalzaon, have also been ulzed n examnng he relaonshp beween globalzaon and energy consumpon Shahbaz e al., 26. Researchers have added oher possble drvng forces o sudy he energy consumponeconomc growh nexus by examnng he relaonshp beween hese wo varables. Snce mos of he sudes n hs group are recen, we wll focus on he perod from 97Q o 25Q4. For example, Anweler e al. 2 fnd ha nernaonal rade would ncrease he ncome level of developng naons, whch wll subseuenly encourage hem o mpor new echnologes ha ransm fewer polluans. Cole 26 nvesgaes he mpac of rade lberalzaon on per capa energy use for 32 developed and developng counres and fnds ha rade lberalzaon ncreases per capa energy use. Tsan 2 repors a undreconal causaly runnng from energy consumpon o real DP a he aggregae level n reece and a bdreconal causaly beween ndusral and resdenal energy consumpon and real DP a he dsaggregae level. Moreover, he auhor deecs no causaly beween ranspor energy consumpon and real DP n eher drecon n reece. By employng panel daa models and provncal daa, Wang e al. 2 fnd he exsence of a bdreconal posve causaly beween economc growh and energy consumpon n Chna. Ceran sudes have examned he causaly beween globalzaon and energy consumpon for developng counres. Narayan and Smyh 29 nvesgae he causal relaonshp beween energy consumpon, expors as an ndcaor of globalzaon and economc growh for sx Mddle Easern counres Iran, Israel, uwa, Oman, Saud Araba,

11 and Syra and confrm he hypohess of a sascally sgnfcan feedback effec beween expors and energy consumpon. Indeed, a % ncrease n expors ncreases DP by.7%, and a % ncrease n DP ncreases elecrcy consumpon by.95%. Usng a panel daa of egh Mddle Easern counres, Sadorsky 2 examnes he rade-energy consumpon relaonshp for Mddle Easern counres and shows a shor-erm causaly runnng from expors o energy consumpon, as well as a b-dreconal causaly beween mpors and energy consumpon. Sadorsky 22 nvesgaes he relaonshps among energy consumpon, oupu and rade for a sample of seven Souh Amercan counres and shows ha energy consumpon resuled n mpors and fnds a feedback effec beween energy consumpon and expors. Hossan 22 examnes he relaonshp beween expors and energy consumpon for Bangladesh, Inda and Paksan and fnds evdence ha valdaes he presence of a neural effec beween expors and energy consumpon.e., expors and energy consumpon are ndependen. Lean and Smyh 2 analyze he relaonshp among economc growh, energy consumpon and nernaonal rade n Malaysa and her emprcal evdence underscores he presence of a undreconal ranger causaly runnng from expors o energy consumpon. The relaonshp among economc growh, energy consumpon, and nernaonal rade are also examned n Chna by Shahbaz e al., 23a. Those researchers emprcal resuls show a feedback effec beween nernaonal rade and energy consumpon. Zhang e al., 23 examne he mpac of domesc rade on regonal energy demand n Chna and repor a posve mpac of rade on regonal energy use. Usng daa from he Turksh economy, Ozurk and Acaravc 23 sudy he relaonshps among economc growh, energy consumpon, fnancal developmen and rade openness. They asser ha economc growh and rade openness cause energy consumpon. Shahbaz e al. 23b make a smlar aemp o nvesgae he causales

12 among naural gas consumpon, expors and economc growh n Paksan. Those researchers repor ha naural gas consumpon conrbues o expors and economc growh. Oher sudes nvesgae he relaonshp beween energy consumpon and globalzaon n developed counres. Sam 2 measures he relaonshp beween energy consumpon, expors and economc growh n Japan, and he emprcal evdence ndcaes ha elecrcy consumpon has a ranger causaly wh expors. The relaonshps among energy consumpon, expors and mpors for 25 OECD counres are also examned by Dedeoglu and aya 23. Those auhors documen he exsence of a bdreconal causaly beween energy and DP, energy and expors, and energy and mpors. There are sudes ha arge mxed groupngs of counres. Usng a panel from 5 Asan counres, Nasreen and Anwer 24 examne he rade-energy-growh nexus and asser ha energy consumpon s posvely mpaced by economc growh and rade openness. Ulzng a heerogeneous panel and ranger causaly, Shahbaz e al. 24a es he connecon beween rade openness and energy consumpon for 9 low, mddle and hgh ncome counres. Those auhors show a U-shaped relaonshp beween rade openness and energy consumpon for low ncome counres bu also fnd an nverse relaonshp for hgh ncome counres. Currenly, researchers have aemped o generae several perspecves o raonalze he relaonshp beween energy consumpon and economc growh by ncludng addonal varables Ozurk, 2; Apergs and Tang, 23. An ssue of consderable mporance s wheher he level of globalzaon of a counry can be a conrbung facor o he relaonshp beween energy consumpon and economc growh. The recen energy leraure also emphaszes he consderable mporance of lnkng he process of globalzaon wh he levels of energy consumpon. For example, for Inda, Shahbaz e al., 26 explore he assocaon beween

13 globalzaon and energy consumpon by usng sub-ndces of globalzaon, such as economc, socal and polcal globalzaon facors. The auhors emprcal resuls ndcae ha globalzaon economc and socal globalzaon decreases energy consumpon. Those auhors also demonsrae a un-dreconal causal assocaon beween globalzaon economc, socal and polcal globalzaon and energy consumpon. Furhermore, he effec of globalzaon on energy consumpon may dffer wh me; hus, s useful o dsngush beween he shor-erm and long-erm effecs. Therefore, he ne effec of globalzaon on energy consumpon should be examned by consderng he mplcaons of globalzaon on susanable economc developmen. However, all prevous sudes examne he mpac of globalzaon on energy consumpon a he condonal mean or cener and gnore he crucal ssue ha energy consumpon may be dfferen across dfferen uanles of he condonal dsrbuon of energy consumpon. There are also many reasons ha explan he drecon of causal effec of globalzaon on energy consumpon. On he one hand, ceran auhors argue ha energy consumpon s posvely lnked o globalzaon. Indeed, globalzaon encourages foregn drec nvesmen and resuls n larger economc and rade acvy, as well as a ransfer of echnology from developed o developng counres, leadng o hgher energy consumpon Soyas e al., 27. On he oher hand, ceran auhors e.g., Wheeler, 2 argue ha globalzaon enhances nvesmen n energy effcen producon echnologes n counres wh hgh envronmenal regulaons, leadng o a negave lnk beween globalzaon and energy consumpon. The prevous analyss shows ha he relaonshp beween globalzaon and energy consumpon s very complex, and hus lnear models fal o ncorporae all hs complexy.

14 3. Mehodology and daa collecon To nvesgae he conegraon relaonshp beween globalzaon and energy consumpon for he op-wo globalzed counres across uanles, we use he recenly developed QARDL model consruced by Cho e al. 25. As ndcaed earler, he QARDL model allows for esng he uanle long-erm eulbrum mpac of globalzaon on energy consumpon. The me-varyng negraon relaonshp s also esed by usng he Wald es, whch perms checkng he consancy of negrang coeffcens across he uanles. The ARDL model s wren as follows: EC p 2 3 ω λdp θ α EC ε where ε s he error erm defned as EC E[ EC / F ], wh F beng he smalles σ feld generaed by, DP,, EC,, DP,,...}, and and are lag orders seleced { by he Schwarz nformaon crera SIC. In Euaon,, DP and refer o he logarhm of globalzaon, gross domesc produc measure of economc growh and capal, respecvely, whle EC represens energy consumpon expressed n logarhm form. Cho e al. 25 exended he model n Euaon o a uanle conex and nroduced he followng basc form of he QARDL p, model: p 2 Q 3 EC α EC ω λ DP θ ε 2 where ε EC QEC / F and Q / EC F s he h uanle of EC condonal on he nformaon se F defned above m and Whe, 23. To analyze he QARDL, we reformulae Euaon 2 as:

15 3 2 ε γ δ γ δ γ δ α DP DP EC DP DP Q 3 where ω γ, j ω δ, DP λ γ, j DP λ δ, θ γ and j θ δ The parameers n Euaon 3 measure he shor-erm dynamcs, whle he long-erm relaonshps beween globalzaon and energy consumpon can be capured by reformulang Euaon 3 as follows n Euaon 4: ' β µ EC M X Q 4 wh ],, [ DP X and where ] [ γ β p and j j j j M ε θ, wh ] [ α µ p and π j l l j. β DP and β are compued n a smlar manner.

16 ,..., { θ θ and,..., { π π are defned such ha p L L θ and L L L L ω ω ω ω π To avod he seral correlaon ofε, we generalze he QARDL as follows: ν θ λ ω ρ α p DP EC DP EC DP EC Q Usng he model n Euaon 5, here remans a lkelhood of conemporaneous correlaon beween ν and, DP and. The prevous correlaons can be avoded by employng he projecon of ν on, DP and wh he form DP DP ε γ γ γ ν. The resulng nnovaon ε s now uncorrelaed wh, DP and. Incorporang he prevous projecon no Euaon 5 and generalzng o he uanle regresson framework leads o he followng QARDL-ECM model: ε θ λ ω β β β ρ α p DP EC DP EC DP EC Q

17 The cumulave shor-erm mpac of he prevous energy consumpon on curren energy consumpon s measured by j p j, whle he cumulave shor-erm mpac of curren and pas levels of globalzaon, gross domesc produc and capal on curren energy consumpon 2 are measured by w w j, λ λ j and θ j j j 3 θ j, respecvely. The long-erm conegrang parameers for globalzaon, gross domesc produc and capal are calculaed as β, ρ β DP DP ρ and β, respecvely. The cumulave shor-erm parameers and he long- ρ erm conegrang parameers are calculaed usng he dela mehod. I s worh nong ha he ECM parameer ρ should be sgnfcanly negave. To sascally nvesgae he shor-erm and long-erm nonlnear and asymmerc mpacs of globalzaon on energy consumpon, we use he Wald es. The Wald es asympocally follows a Ch-suared dsrbuon and s used o es he followng null and alernave hypoheses for he shor-erm and long-erm parameers, w, β and ρ : H : F * f versus H : F * f H : S ω* s versus H : S ω* s H : S β * s versus H : Sβ * s H : S ρ* s versus H : Sρ* s

18 where F and f are h * ps and h * are pre-specfed marces, and S and s are h * s, and h * are pre-specfed marces wh h beng he number of resrcons Cho e al and denoes respecvely, DP and. Specfcally, we run he Wald es o nvesgae he nonlneares on he speed of he adjusmen parameer and he long-erm negrang parameer. For each counry and each parameer, we run four ess. For example, we es he followng null hypohess for he ρ parameer H ρ.5 ρ. ρ.2 ρ.3 L ρ.9.95 agans he : * * * * * ρ* alernave \ ρ ρ H a : * * j and j. wh, j {.5,.,.2, L,.8,.9,.95} The same hypoheses are esed on he β, βdp and β parameers and on he four cumulave shor-erm parameers *, w *, λ* and θ *. We have chosen he sample counres,.e., he op-wo globalzed economes, n accordance wh he OF ndex of globalzaon globalzaon.kof.ehz.ch developed by Dreher 26, as ndcaed earler, o compare her emprcal resuls by nvesgang he assocaon beween globalzaon and energy consumpon by ncorporang economc growh and capal n energy demand funcon. We have used energy use k of ol euvalen as a measure of energy consumpon, gross domesc produc consan 2 US$ as a proxy for economc growh and gross fxed capal formaon consan 2 US$ as a measure of capal. These daa are obaned from he World Developmen Indcaors CD-ROM, 25. The oal populaon s ulzed o ransform he daa no per capa uns. All he prevous daa are rereved a he annual freuency and hen ransformed no uarerly daa followng Sba e al. 24 by usng he uadrac mach-sum mehod. The varables have hen been ransformed no naural logarhmc forms. The globalzaon ndex s derved from Dreher 26. Ths overall ndex s 4 See cho e al. 25 for a dealed defnon of he Wald sascs.

19 consruced from hree sub-ndces: he economc globalzaon, he socal globalzaon and he polcal globalzaon. The economc globalzaon ncludes acual economc flows.e., rade, foregn drec nvesmen and porfolo nvesmen and consrans on rade and capal usng hdden mpor barrers, such as arff raes and axes on nernaonal rade. The socal globalzaon s defned n he form of sharng culures and languages among counres and s measured by he number of embasses n a counry and he membershp n nernaonal organzaons. Fnally, he parcpaon n he UN Secury Councl and nernaonal reaes s used o generae an ndex of polcal globalzaon. The me perod s from 97Q o 25Q4. < Inser Table here > < Inser Table 2 here > Table repors he descrpve sascs of he energy consumpon and globalzaon daa n he Neherlands and Ireland. The resuls ndcae ha n he average he Neherlands consumes more energy and shows a hgher level of globalzaon han Ireland. Ths fndng hghlghs he role of globalzaon n rsng energy consumpon n hose counres. The energy consumpon daa n boh counres show a hgher varably, as compared o he globalzaon daa. lobalzaon daa are negavely skewed whle energy consumpon s negavely skewed n he Neherlands, bu posvely skewed n Ireland. Ths means ha he globalzaon and energy consumpon daa n he Neherlands have longer rgh als han he normal dsrbuon. Energy consumpon has also faer als han a normal dsrbuon n he Neherlands and, ogeher wh globalzaon daa n boh counres, has hnner als han he normal dsrbuon n Ireland. The Jarue-Bera sascs also show ha energy consumpon and globalzaon daa devae from he normal dsrbuon.

20 Pror o esmang he QARDL model, s mporan o check for he order of negraon of he me seres n our daa se. We hus performed he augmened Dckey-Fuller ADF and Zvo-Andrews 992 ZA un roo ess and repored he resuls n Table 2. The ZA es has he advanage of accounng for a srucural break n he daa. The resuls show ha all he me seres are I n he Neherlands and Ireland, excep energy consumpon whch s found o be I, and hus saonary as he ADF and ZA ess rejec he null of un roo a he % and 5% sgnfcance levels, respecvely. Ths ualfes he QARDL model o be an approprae model for hs sudy. 4. Emprcal resuls and dscusson The OLS esmaon resuls for he wo op globalzed counres show ha here s evdence of lnear conegraon beween globalzaon, economc growh, capal and energy consumpon for he Neherlands only, snce he speed of adjusmen coeffcen ρ * for hs counry s sgnfcanly negave, hus havng he reured negave sgn. However, hs s no he case for Ireland. Furhermore, he lnear long-erm conegrang parameers beween energy consumpon and globalzaon and beween energy consumpon and gross domesc produc are found o be nsgnfcan n hose wo op globalzed counres. Capal s sgnfcanly lnked o energy consumpon n he long-run n he Neherlands, whle s found no o nfluence energy consumpon n he long-run n Ireland. Among hose op globalzed counres, he slowes reverson speed s recorded for Ireland.6%, and he fases s accorded o he Neherlands.2%.

21 < Inser Table 3 here > < Inser Table 4 here > The resuls of he QARDL model esmaon for hose op globalzed counres show ha he esmaed parameer ρ * s hghly sgnfcan, wh he expeced negave sgn a all uanles for he Neherlands, ndcang ha here s a reverson o he long-erm eulbrum relaonshp beween energy consumpon and globalzaon. However, ρ * s sgnfcanly negave for Ireland n four ou of he eleven consdered uanles n our emprcal esmaon. The resuls also show ha β LOB s sgnfcan prmarly a hgh uanles for he Neherlands and a exreme hgh uanles for Ireland. I s worh nong ha he long-erm conegrang parameer β LOB s posve for Ireland, ndcang an upward rendng long-erm relaonshp beween energy consumpon and globalzaon. In conras, he Neherlands has a downward rendng long-erm relaonshp beween energy consumpon and globalzaon as β LOB s negave. Indeed, globalzaon ncreases energy consumpon n Ireland because leads economc acvy. There s a mgraon of manufacurng and engneerng companes e.g., machnery, auomove, chemcals from ermany o Ireland. However, n he Neherlands, globalzaon akes he form of rade and capal nflows, hus allowng he counry o mpor new echnology and conseuenly o reduce energy consumpon. Moreover, globalzaon hrough nformaon and culural flows enables local people o acure beer pracces avalable n oher counres, whch reduces energy consumpon for producon and consumpon acves. The emprcal fndngs also show ha β s sgnfcan a he hghes uanles for he DP Neherlands and a he % uanle for Ireland. β DP s negave for boh counres ndcang a

22 negave relaonshp beween energy consumpon and economc growh. Ths resul suppors he energy effcency hypohess whch assers ha a reducon n energy consumpon provdes an alernave way o ncrease economc growh, whou damagng he envronmen. β, n urn, s revealed o be sgnfcan a he medum uanles for he Neherlands bu a he % and 9% uanles for Ireland. The posve value found for β n he wo counres corroboraes he dea ha effcency and avalably of capal suppors lendng o households and frms, hus encouragng consumers o purchase large-cke ems, hus ncreasng he consumpon of energy. Turnng o he analyss of shor-erm dynamcs, he fndngs show ha curren energy consumpon varaons are sgnfcanly and posvely nfluenced by her own pas levels n he wo counres. In he shor-erm, curren and pas changes n globalzaon do no mpac curren changes n energy consumpon n Ireland and he Neherlands. Curren and pas changes n globalzaon are found o no mpac sgnfcanly curren varaons of energy consumpon a all n hose wo mos globalzed counres. Alhough nsgnfcan, he nfluence of globalzaon on energy consumpon n he shor-run s negave n he Neherlands bu posve n mos of he uanles n Ireland. Cumulave curren and pas changes n DP nfluence he curren changes n energy consumpon posvely n he Neherlands and negavely n Ireland. The nensy of he laer nfluence vares across counres, showng an asymmerc nfluence of economc growh on energy consumpon n he shor-erm. Capal exers a posve shor-erm mpac on he energy consumpon n Ireland, whereas has a negave conemporaneous nfluence and a posve nfluence on energy consumpon n he Neherlands. Capal nfluences energy consumpon n he shor-erm manly a he low uanles n Ireland and Neherlands and only a he hgh uanles n he Neherlands.

23 Fgures and 2 depc he dynamcs of he parameer esmaes over he consdered uanles for he Neherlands and Ireland, respecvely. A shown n hose fgures, he esmaed parameers dsplay a dssmlar pah compared o her respecve correspondng lnear esmaes, ndcang ha hese esmaed parameers behave dfferenly across he uanles. < Inser Fgure here > < Inser Fgure 2 here > Our resuls for he correspondng Wald ess show ha he null of lneary.e., parameer consancy of he speed of adjusmen parameer s rejeced for boh he Neherlands and Ireland. However, he null hypohess of he parameer consancy across he uanles for he long-erm negrang parameer β s rejeced for he Neherlands only. Ths shows ha he LOB conegrang parameer beween globalzaon and energy consumpon s dynamc n dfferen uanles n he Neherlands. Ths resul could be explanng by he fac ha he Duch governmen has passed hrough dfferen sages of achevng clean energy sraegy. Indeed, he Neherlands has long araced nvesmen n ol and gas sorage. Beween 99 and 22, he Neherlands amed a smulang energy effcency and nnovaon n energy-nensve ndusres bu he counry remaned one of he mos CO2-nensve economcs. Recenly, he Duch governmen adoped a work plan o acheve a zero-level greenhouse gase emssons by 25. The null of parameer consancy across he uanles regardng β DP and β s acceped for he wo counres, meanng ha alhough he parameer esmaes β DP and β are dfferen across uanles hey are sgnfcan for some uanles. Ths dfference s no sascally sgnfcan. < Inser Table 5 here >

24 Regardng he shor-erm cumulave mpac of he pas levels of energy consumpon esmaon, he resuls ndcae ha he Wald es srongly rejecs he null hypohess of parameer consancy across he consdered uanles for boh he Neherlands and Ireland. The Wald es also rejecs he null of parameer consancy regardng he shor-erm mpac of globalzaon on energy consumpon n he Neherlands bu fals o rejec he null hypohess of parameer consancy across he uanles for Ireland. The fndngs also ndcae ha DP exers an asymmerc conemporaneous and lagged nfluence on energy consumpon n Ireland as he Wald es also srongly rejecs he null hypohess of parameer consancy across he uanles for boh lags. In conras, DP s found o exer a symmerc cumulave shor-run nfluence on energy consumpon n Ireland and he Neherlands as he Wald es fals o rejec he null hypohess of parameer consancy over he uanles. Regardng he shor-erm mpac of capal on energy consumpon, he null of parameer consancy s srongly rejeced for he Neherlands and Ireland boh conemporaneously, and also a he one-lag perod for he Neherlands ndcang ha capal nfluences energy consumpon n an asymmerc manner n he shor-run n boh counres a he respecve lags, as seleced by he AIC creron. A deeper examnaon of he resuls of he Wald es ndcaes ha he cumulave shor-run mpac of capal on energy consumpon s symmerc. Indeed, he Wald es fals o rejec he null hypohess of cumulave parameers consancy across he uanles a he convenonal levels of sgnfcance. Alhough Ireland and he Neherlands are he op globalzed counres, some dfferences are observed n he behavor of he parameer esmaes across he uanles of he energy consumpon dsrbuon. The dfferences may be due o dfferen naonal sascs n he wo counres. Indeed, alhough he level of globalzaon s comparable n boh counres, however

25 DP per capa s much hgher n Ireland han n he Neherlands almos.5 mes. On he oher hand, unemploymen rae s hgher n Ireland 6% as compared o ha n he Neherlands 4.5%. In conras, he sock marke prce reurn s almos double n he Neherlands.85%, compared o ha of Irsh sock marke 5.29%. 5. Concluson and polcy mplcaons To he bes of our knowledge, hs s he frs sudy ha srves o sudy he relaonshps among globalzaon, economc growh, capal and energy consumpon for hose op globalzed counres, usng he uanle dsrbuon for energy consumpon, as specfed n he QARDL model over he long me sample perod, 97Q-25Q4. Ths analyss s mporan, snce here have been concerns ha globalzaon would resul n an ncrease n energy consumpon for nearly all counres, and ha he expanson of globalzaon s usually assocaed wh an expanded use of energy due o he esablshed emprcal connecon beween economc growh and energy demand. Our resuls sugges ha globalzaon s srongly relaed o energy consumpon over he long-erm for he wo op globalzed economes. However, he resuls also ndcae ha he shorerm effec of globalzaon on energy demand s lmed and remans nsgnfcan for hose hghly globalzed counres. Ths fndng s very neresng, as ndcaes ha a one polcy sraegy canno be eher consan or homogeneous across me and naons, when consderng counres wh hgh levels of globalzaon. More mporanly, gven ha he mos globalzed counres may benef from globalzaon-nduced new echnologes and ha he leas globalzed economes end o have domesc envronmenal laws ha are laxer han hose of he mos globalzed counres, our sudy

26 suppors he vew ha polcy makers should no worry abou he negave envronmenal conseuences of globalzaon. Furhermore, gven ha nformaon and knowledge can currenly be characerzed as consderably accessble, appears ha he posve envronmenal effecs of globalzaon would domnae he negave effecs. Ths supposon s very rue consderng ha corporae globalzaon s wdespread, herefore, corporaons wll be more nvolved n ransferrng clean echnology from developed o developng counres. The fndngs also ndcae ha economc growh s relaed o energy consumpon n he long-erm n he Neherlands and Ireland. Furhermore, capal srongly mpacs energy consumpon n boh counres. In he shor-erm, economc growh nfluences energy consumpon n he wo consdered counres. The emprcal resuls also mply here are ceran challenges for polcy-makers n her pursu of adeuae envronmenal reforms. The long-erm mpacs of globalzaon on energy consumpon could neuralze he neres n shor-erm reforms. Indeed, our resuls defnely suppor hs noon, as hey reveal ha energy consumpon does no reac o globalzaon n he shor-erm n he Neherlands and Ireland. Therefore, we recommend ha envronmenal reforms connue over a lenghy perod o yeld her desred mpacs n he long run. Consderng he resuls repored above, our sudy sresses he need for creang serous connuous cooperaon beween developed and less developed naons n sharng echnologes ha reduce polluon n he comng decades. As globalzaon connues o expand, so wll he world s demand for energy, whch should rase a range of serous envronmenal concerns f no addressed soon. In addon, governmen nervenons encourage local frms o creae new job opporunes and o compee domescally and nernaonally, leadng o an mprovemen n

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31 Table : Descrpve Sascs Energy consumpon lobalzaon Neherlands Ireland Neherlands Ireland Mean Max Mn Sd. dev Skewness uross JB [.].884 [.2] [.].23 [.7] Noes: JB denoes he emprcal sascs of he Jarue-Bera es for normaly. Table 2: Saonary es resuls ADF level ADF ZA level ZA Panel A : Energy consumpon The Neherlands *b ***c -5.2** *** Ireland.262 c -3.3 ***c *** Panel B : lobalzaon The Neherlands -.93 b ***c *** Ireland a **b *** Panel C : ross Domesc Produc The Neherlands -.8 b -2.5 **c ** Ireland b ***b *** Panel D : Capal The Neherlands a ***c ** Ireland a ***c *** Noes: The numbers n hs able ndcae he emprcal values of he ADF and ZA ess sascs for saonary. The leers a, b and c refer o he model wh rend and nercep, he model wh nercep and he model whou rend and nercep, respecvely. The asersks ***, ** and * ndcae a rejecon of he null of a un roo a he respecve sgnfcance levels of %, 5% and %, respecvely. The crcal values for he ZA es are %, % and %.

32 Table 3: OLS and Quanle Esmaon Resuls for Ireland OLS esmaon resuls *** ***.38.7***.37.8** * ** *** *** *** ** ** *** *** *** *.55* -.776**.982**.372*** * *** ***.9** *** ***.76** * *** ***.6* *** ***.79*** *** ***.58* *** *.75* *** * **.5** **.433*** *.65*** *** * Noes: The able repors he OLS and uanle esmaon resuls. The sandard errors are beween brackes. ***, ** and * ndcae sgnfcance a he %, 5% and % levels, respecvely. The p and lag lenghs n E. 6 are seleced usng he Schwarz Informaon Crera such ha p 6; **.47.53***.47.5** *

33 Table 4: OLS and Quanle Esmaon Resuls for he Neherlands OLS esmaon resul.73*** -.2***.64.2 Quanle esmaon resuls ** ***.68.68** *** *** *** *** **.23.74*** *** *.2.483** ** *** * *** ** *** *** *.6.48***.89.8** *** *** ***.74 22** *.65.25* *** *** *.9.355***.7.43*** *** *** * ***.63.35*** * * *** *** **.9.366***.59.2** ** *** *** ** ***.73.49*** ** **.32.9* *** *** *** **.89.43***.9.52** *** ** *.38 -.** ***.9.233** ** * *** 5 -.2*** ** ** *** 6.372** ** **.25 Noes: The able repors OLS and uanle esmaon resuls. The sandard errors are beween brackes. ***, ** and * ndcae sgnfcance a he %, 5% and % levels, respecvely. The p and lag lenghs n E. 6 are seleced usng he Schwarz Informaon Crera and p 6;..

34 Table 5: Wald Tes Resuls Ireland ρ 2.28** [.6] β.36 LOB [.22] β.95 DP [.489] β.7 [.79] 4.82*** [.] Neherlands 4.45*** [.] 4.26*** [.].86 [.568].9 [.524] 2.4** [.24].77* 2 [.69] w.23 [.475] λ 2.88*** [.2] 2.42** [.].5 [.883] λ.89* [.5] θ.75* [.74].7* [.82] θ 2.78*** [.3] Cumulave shor-erm effec: 4.97*** * [.] λ.2 * [.292] * θ.33 [.27]

35 Speed of Adjusmen Bea_lob Bea_DP Bea_Capal Rho Quanle Bea_lobalzaon Quanle Bea_DP Quanle Bea_Capal Quanle Ph- Ph-2 w Lambda Ph Quanle Ph Quanle w Quanle Lambda Quanle Tea Tea Tea Tea Quanle Quanle Fgure : Quanle parameer esmaes-the Neherlands. Noes: The plos show he esmaed parameers mddle sold lne on he vercal axs for he uanles.5,.,.2,,.9,.95 wh he 95% confdence nerval ouer doed lnes.