AN ECONOMETRIC ANALYSIS OF ENERGY CONSUMPTION AND ECONOMIC GROWTH IN TURKEY

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AN ECONOMETRIC ANALYSIS OF ENERGY CONSUMPTION AND ECONOMIC GROWTH IN TURKEY

ABSTRACT
It is commonly maintained that energy is an imporant input of industrial growth and, in this way, economical development. The scarcity of energy resources in the world make the relation between economic development and energy consumption more significant. In this study, the possible cointegration is inspected by Engle-Granger and Johansen Tests and the direction of the causality is searched by Granger causality test. The analysis showed that there is a long and short term relationship between economic growth and energy consumption in Turkey fort he period of 1980-2006.

1. INTRODUCTION

Since the Industrial Revolution, the demand for energy has followed an increasing trend, globally. Due to the unequable distrubition of available energy resources in the world and increasing demand for these resources, countries have started to search new energy methods for decades. Energy, as a production factor, is one of the most significant inputs of industrial and economical development. Especially after the oil crisis in 1973 and its destructive impacts on economies, the relation between energy and economic growth have been begun to study. However, there is still a conflict about the direction of the causality relationship between them. There are different researches on whether rising energy consumption triggers to economic growth or economic growth causes an increase in energy consumption, and they have been subjected to emprical challenges. Particularly after 1980, depending on the population growth and industrialization process, it can be seen that there is a significant increase in energy consumption in Turkey, also. Neoliberal economic policies that based on imports have brought a decline in agriculture and a rise in industry in this period. This changing perspective in Turkish economy have caused to occur an increase in the demand for energy resources such as oil, natural gas, coal. Therefore, this paper inspects the causality relationship between the economic growth and energy consumption in Turkey after 1980 by considering the real GDP of Turkey and total energy consumption between 1980 and 2006.

2. LITERATURE REVIEW

The first study about the causal relationship between economic growth and energy consumption was made by Kraft in 1978 for the U.S economy by considering 1947-1974 period and resulted in that economic growth causes an increase in energy consumption. After Kraft, in 1980, Akarca and Long again focused on the U.S for 1973-78 period. They used Granger causality test and concluded that there is no causal relation between GDP and energy consumption. In 1992, Yu and Jin supported the same idea that there is no relation between these two varibles in the U.S. This results were conflicting with Kraft’s study. In 2004, Oh and Lee studied on Korean case for the period of 1970-1999 by using Granger causality test and they found that there is no causal relationship between economic growth and energy consumption in the long run. But, in the short run, it can be said that there is a unidirectional Granger causality running from energy consumption to economic growth. In Wolde-Rufael(2005), the base time series is 1971 and 2001 and the paper focused on 8 developing countries by using cointegration analysis and Granger causality test and claimed that these two variable are cointegrated in the long run. Finally, Mahadevan and Asafu-Adjaye searched the energy exporter countries such as Australia, Norway, England, USA and India, and applied unit root test, cointegration analysis and Granger causality test. This paper resulted in that there is a bidirectional causality relation between energy consumption and economic growth in energy exporter countries in the short run. In the long run, there is a unidirectional relation running from growth to consumption. Taking into account the researches for Turkey, in 2004, Altınay and...
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