A multivariate causality analysis between energy consumption and growth: The case of Turkey

ABSTRACT

The causality relationship between energy consumption and economic growth has been one of the most commonly investigated topics over the last decades. Energy is considered a key link for growth in biophysical models. This study, based on annual time series data over the period from 1976 to 2013 in Turkey, analyzed the dynamic causality relationships between energy consumption and growth using error correction model and bounds testing with an autoregressive distributed lag approach. The overall results indicate that energy and growth are not neutral with respect to each other and support the existence of short- and long-run one-way positive causality links from energy consumption to growth. Energy consumption, also increasing labor and capital in production process, promote economic growth, and reduction in these production factors adversely affects the Turkish economy. Therefore, these empirical results support that the growth hypothesis is valid for Turkey.

KEYWORDS:

• ARDL
• bounds testing
• ECM
• economic growth
• energy consumption
• fixed capital
• labor
• Turkey