# Energy Consumption and Financial Development in NAFTA Countries, 1971-2015
## 4 Data and Analysis of Results  
This study uses annual data from NAFTA countries from 1971-2015. The data on the variables of GDP per capita (constant dollars of 2010), EC per capita (measured in kg of oil equivalent), FD (domestic credit to the private sector by banks, % of GDP), CPI, and URB (measured by the % of the urban population compared to the total) were taken from the World Bank ([[http://databank.worldbank.org/data](http://databank.worldbank.org/data)]([http://databank.worldbank.org/data](http://databank.worldbank.org/data))). All variables are expressed in natural logarithms. The results of the CD cross-section dependence test are presented in Table 1. The null hypothesis of non-dependence is rejected for all variables at a level of significance of 1%, except for the EC variable,which rejects the null hypothesis at a 10% level of significance. Therefore, in all the variables, there is a transversal dependency, and the variables of each country are correlated with each other. Therefore, it is very important to apply unit root tests that generate consistent results in the presence of cross-section dependence, for which we apply the two tests suggested by [PERSON] [30]. Table 2 shows the results of the new tests of the unit root where it is confirmed that the variables are integrated in order one. All the variables have unit roots in the levels, but they are stationary in the first differences at a 1% level of significance. To test the presence of an equilibrium or long-term relationship between the integrated variables of the same order, in this research, two cointegration tests are used in panel data: the Kao test [37] and the Fisher-type test using [PERSON]'s methodology [27]. With the Kao test in Table 3, the null hypothesis of non-cointegration at the 1% level of significance is rejected, indicating that there is a long-term relationship between the variables. On the other hand, the second cointegration test indicates that there are at least two cointegration relationships, since the null hypothesis is rejected at a 1% level of significance, confirming a long-term relationship between the variables (Table 4). According to the econometric literature, when the variables are cointegrated, the OLS technique to estimate the coefficients of panel data models turns out to be biased and produces inconsistent estimates. The new methods developed to estimate cointegration relationships using panel data are the FMOLS and DOLS estimators [31; 32; 33]. These approximations \begin{table}
\begin{tabular}{c c c c c c} \hline \hline
**Variable** & **EC** & **FD** & **TO** & **CPI** & **GDP** & **URB** \\ \hline
**CD statistic** & 1.730 * & \(-\)3.378 *** & 11.397 *** & 11.373 *** & 11.088 *** & 10.873 *** \\
**_p_ value** & 0.083 & 0.000 & 0.000 & 0.000 & 0.000 \\ \hline \multicolumn{6}{c}{Notes: *** and * denotes the rejection of the null hypothesis at the 1% and 10% levels, respectively.} \\ \end{tabular}
\end{table} 
Table 1: [PERSON] [36] test for cross-sectional dependence. \begin{table}
\begin{tabular}{c c c} \hline \hline
**Variable** & **Deterministic Parameters** & **CADF** & **CIPS** \\ \hline EC & CT & \(-\)0.085 & \(-\)3.712 *** \\ FD & CT & \(-\)0.447 & \(-\)2.372 \\ CPI & CT & 1.330 & \(-\)1.480 \\ GDP & CT & \(-\)1.399 & 0.911 \\ URBA & CT & \(-\)1.545 & \(-\)1.571 \\ TO & CT & \(-\)0.891 & \(-\)2.503 \\ \hline \multicolumn{3}{c}{First difference} \\ \(\Delta\)EC & C & \(-\)5.217 *** & \(-\)5.430 *** \\ \(\Delta\)FD & C & \(-\)4.934 *** & \(-\)5.284 *** \\ \(\Delta\)CPI & C & \(-\)3.106 *** & \(-\)3.527 *** \\ \(\Delta\)GDP & C & \(-\)2.881 *** & \(-\)3.970 *** \\ \(\Delta\)URB & C & \(-\)2.086 *** & \(-\)2.631 *** \\ \(\Delta\)TO & C & \(-\)4.677 *** & \(-\)4.770 *** \\ \hline \end{tabular} Notes: *** and ** denote the rejection of the null hypothesis at the 1% and 5% levels, respectively. C denotes constant; CT denotes constant and trend.  
\end{table} 
Table 2: Cross-sectional Augmented Dickey Fuller (CADF) and Cross-sectional Im, Pesaran, and Shin (CIPS) panel unit root test [30].