Summary and Conclusions of the Article
This study uses a panel error-correction model with a cross-sectional dependency to examine how globalization affects energy use. The empirical findings show that globalization and long-term energy usage have an inverse U-shaped connection. Energy consumption will increase until a particular level of globalization is achieved and then starts to fall, according to the link between globalization and energy consumption over the long term. Financial progress also has a nonlinear threshold effect on this inverted U-shaped connection. The findings imply that while executing a plan to reduce energy consumption significantly, authorities should pay more attention to increasing globalization and focus on financial development’s role in economic development. Globalization and energy consumption are the two main factors in the empirical analysis.
The nonlinear threshold function of financial development in such connections is thoroughly investigated in this study, which provides a panel error-correction model with cross-sectional dependency to examine potential nonlinear links between globalization and energy consumption:
- There is a particularly long-term inverted U-shaped link between globalization and energy use.
- As globalization progresses, energy consumption will eventually increase, given the predicted long-run elasticity of energy consumption to globalization.
- The rigorous analysis demonstrates that using several proxies for the independent variables and gradually including control factors strengthen the inverted U-shaped link between globalization and energy usage.
- The inverted U-shaped link between globalization and energy consumption is subject to a nonlinear threshold impact of financial development.
The results of this empirical study have significant policy ramifications. On the one hand, given the rising severity of resource scarcity and global warming, governments may need to pay greater attention to the impact of globalization when drafting laws to restrict energy use.
Approach or Methods
To estimate energy consumption, the author uses a measure of primary energy consumption calculated from U.S. Energy Information Administration data and includes a time series of historical data from 1980 to 2016 (Huang et al., 2020). A balanced panel of 98 countries is chosen as the data sample based on the consistency of the temporal coverage of the data. Economic globalization refers to commercial and financial globalization, primarily the movement of goods, capital, and services. Social globalization includes intercultural, informational, and cultural globalization, which essentially refers to the diffusion of knowledge, concepts, ideas, and people. Political globalization primarily refers to the dissemination of government rules. The World Development Indicators are where the data for the control variables are from. All variables are changed to logarithms to address heteroscedasticity and make it easier to explain regression results as elasticities.
The tables give the pertinent descriptive statistics for the variables. The authors use a scatter plot to depict the percentage change in globalization and energy consumption from 1980 to 2008. Globalization and energy consumption from 1980 to 2016; the fitted curve is shown by the blue line, and the corresponding shaded region indicates the 95% confidence interval. This graph indicates the previous nonlinear connection or globalization’s conflicting positive and negative effects on energy usage.
Article Evaluation
The title of the article does not match its content. It misleads the reader, which makes the article of lesser quality. The title asks how globalization will reduce energy consumption, but the article needs to provide a clear answer. The author should have chosen a headline that focuses on empirical analysis. The abstract is specific, representative of the article, and in the right form. It states that this study investigates the effects of globalization on energy consumption using a panel error-correction model with cross-sectional dependence. The article’s purpose is clearly stated in the introduction and is consistent with the rest of the article.
I found no errors of fact or interpretation, for example, the claim that with increasing globalization, interregional cooperation and integration in energy, finance, and technology are becoming more frequent and intense (Du et al., 2019). Experts and scholars write this source, and the statement is credible and supported by factual data. The second statement I verified is that the cross-sectional dependence test is used to investigate the cross-sectional properties of all panel data (Pesaran, 2021). This statement is true and supported by research.
I found an article not in the text but on the links page. It is an article called Economic growth, energy consumption and CO2 emissions in Gulf Cooperation Council countries. The authors examine the empirical relationship between economic growth, energy consumption, and carbon dioxide emissions (Salahuddin & Gow, 2014). Upon checking, another source was found, listed on the references page, but it has yet to be used by the author in the text. It is an article titled Are Modern Economies Following a Sustainable Energy Consumption Path? In it, the authors look at past trends in global primary energy resources concerning monetary and demographic variables in a top-down structure (Recalde et al., 2014). The study focuses too much on the results section, especially the part about the panel unit. The order of the integrated series for each variable is tested with a panel unit root test with corrected inter-section dependence based on the CD test to see if the criterion for creating a panel ARDL model can be met. Thus, the empirical data are sufficient to construct a panel ARDL model. This section uses the Granger panel causality test to identify possible unidirectional, bidirectional, or no causal relationships between globalization and energy consumption.
Given that all variables exhibit cross-sectional dependence, as described earlier, critical values were obtained using the block bootstrap method to address cross-sectional dependence and the Bayesian Information Criterion (BIC) to determine the proper order of lags (Huang et al., 2020). The results of the aforementioned early experiments lay the foundation for a panel ARDL model with cross-sectional dependence, which will be used to study the potential nonlinear effects of globalization on energy consumption. This ARDL model can be transformed into a panel error correction model with intersectional dependence using several mathematical processes. The benchmark model is estimated using standard mean group (MG) estimation with and without corrected inter-section dependence.
In turn, the section on robustness analysis could be made broader. Control variables such as economic growth, urbanization, and financial development are included in the panel error-correction model to assess the robustness of the results and look at the effect of control factors on energy consumption. According to the diagnostic test results, the RMSE value decreases steadily, but the corresponding p-value of the CD test still significantly rejects the null hypothesis (Huang et al., 2020). The decreasing RMSE value confirms that the CMG method provides a better estimate when control variables are added one at a time. A larger p-value shows that the cross-sectional dependence problem has been resolved. These diagnostic test results further emphasize the importance of eliminating cross-sectional dependence by obtaining an unbiased estimate using the average cross-sectional value of the dependent and independent variables.
Even though the results of this empirical study have important policy implications, I would love to see more discussion about future work. On the one hand, given the increasingly serious situation of natural resource scarcity and global warming, governments should pay more attention to the role of globalization when formulating energy consumption control policies.
Globalization may impact the structure of energy consumption, which could be assessed by the proportion of fossil energy consumption (including that of coal, oil, oil and gas, and other liquid fuels) to total primary energy consumption. However, this is a different issue that needs to be addressed simultaneously in the scope of this small study. In practice, globalization may be advantageous for both fossil and non-fossil technologies. However, there should also be certain important trade-offs that define globalization’s role in the transition to low-carbon energy. Shortly, this intriguing issue will be researched.
Mostly the authors’ statements are clearly expressed in the research. The possible link between globalization and energy use has increasingly gained popularity in energy-economic studies during the last few decades. Previous research has shown that globalization significantly affects energy use. Determining whether globalization has a beneficial or negative impact on energy consumption and whether these impacts vary depending on the time of year is still a challenge. The author discussed the important role of globalization in the relationship between financial development and energy consumption, which has recently been the subject of several studies. However, he has largely focused on its linear effects and paid little attention to its potential nonlinear effects, leaving noticeable gaps that the current study will attempt to fill. In the meantime, as globalization advances, economic, social, and political cooperation and communication across nations increase. This suggests that various nations may be dependent on one another across sectors.
The author has been objective throughout this article; the extent and direction of globalization’s impact on energy consumption are still hotly debated. There are two schools of thought on how globalization affects energy consumption. Many studies using exports, imports, real exchange rates (exports and imports), or liberalization as typical indicators of globalization support the first school of thought’s claim that globalization can increase energy consumption by stimulating economic activity and social exchange. For example, Cole studied the impact of trade liberalization on energy consumption in 32 industrialized and developing countries between 1975 and 1995 and found that trade liberalization can increase energy consumption per capita (Huang et al., 2020). In other words, the increasing impact of trade (imports and exports) on energy consumption occurs in the short and long term.
References
Du, Y., Song, B., Duan, H., Tsvetanov, T. G., & Wu, Y. (2019). Multi-renewable management: Interactions between wind and solar within uncertain technology ecological system. Energy Conversion and Management, 187, 232-247. Web.
Huang, Z., Zhang, H., & Duan, H. (2020). How will globalization contribute to reducing energy consumption? Energy, 213, 1-11.
Pesaran, M. H. (2021). General diagnostic tests for cross-sectional dependence in panels. Empirical Economics, 60(1), 13-50. Web.
Salahuddin, M., & Gow, J. (2014). Economic growth, energy consumption and CO2 emissions in Gulf Cooperation Council countries. Energy, 73, 44-58. Web.
Shahbaz, M., Shahzad, S. J. H., Mahalik, M. K., & Sadorsky, P. (2018). How strong is the causal relationship between globalization and energy consumption in developed economies? A country-specific time series and panel analysis. Applied Economics, 50(13), 1479-1494. Web.