Stochastic Convergence of Coal Consumption – Fresh Evidence with Sharp and Smooth breaks

Abstract

Abstract This study attempts to revisit the stochastic convergence of coal consumption for 39 countries through panel unit root test with both sharp and smooth breaks proposed by Bahmani-Oskooee et al. (2014). The empirical findings support convergence for 34 of 39 countries. The coal consumption for Ireland, China, South Africa, Indonesia and Vietnam is divergence. That is, shocks to coal consumption for these five countries would make permanent effects on the move path. The time-varying fitted intercepts indicate the more robust estimation of this study. The traditional unit root tests perform lower efficiency on testing the stationarity of coal consumption. Besides, not only sharp breaks should be considered in the future studies, but also smooth breaks should be also approximated. Policy conservation policy would make transitory impacts on coal consumption for converging group, but permanently affect coal consumption for diverging group. For Ireland, China, South Africa, Indonesia and Vietnam, the policy conservation policy would indirectly affect aggregate economic sectors related to consume coal energy. However, to cut the increasing trend of coal consumption, other renewable energy should further be explored. Finally, some future research directions are recommended in the end.