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Are Fluctuations in Gas Consumption Per Capita Transitory? Evidence from LM Unit Root Test with Two Structural Breaks

Shahbaz, Muhammad and Solarin, Sakiru Adebola and Mallick, Hrushikesh (2015): Are Fluctuations in Gas Consumption Per Capita Transitory? Evidence from LM Unit Root Test with Two Structural Breaks.

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Abstract

With a view to determine the effectiveness of the policies aimed at boosting the natural gas consumption, this paper examines the unit root properties of natural gas in 44 countries, for the period 1965 to 2010. Applying the LM unit root tests, which allow for a maximum of two structural breaks, we are able to reject the null hypothesis of unit root in the natural gas consumption series of 57% of the countries, under study. The implication of these results is that shocks to natural gas consumption in several countries will produce transitory effects. A key consequence of this finding is that initiatives designed to have permanent positive effects on natural gas, such as construction of large natural gas pipeline network, are to be effective in increasing the share of natural gas consumption in only 43% of the total sample.

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