The Korean Journal of Economic Studies
An Analysis of Korean Energy Consumption Volatility
Donghyun Shin (Greenhouse Gas Inventory and Research Center of Korea), Ha-Hyun Jo (Yonsei University) and Jaehyeok Kim (Yonsei University)Year 2015Vol. 63No. 3
Abstract
This paper investigates the volatility change of Korean energy consumptionapplying endogenous structural break analysis methods. Empirical results showthat the energy consumption volatility in Korea has reduced by 50% afterJanuary, 2002. In the aspects of sector and energy source, the volatility oftransportation, commerce‧household, public energy consumption andpetroleum has decreased. On the other hand, the volatility of coal andrenewable energy has increased. The analysis indicates that industry,commerce‧household, petroleum and heat energy consumption are the mainsources of the volatility reduction. The weakened relationship between industryproduction and energy consumption is also found to reduce the volatility.Another important reason for the volatility reduction is the decrease ofadjustment speed among energy consumption, industry production and energyprice caused by the reduced size of disequilibrium error. These empiricalresults imply that improvement of energy efficiency and structural transitionfrom energy intensive industry to energy efficient industry should beaccelerated in order to maintain the stability of Korean energy consumption.