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TESTING CAUSAL RELATIONSHIPS BETWEEN ENERGY CONSUMPTION, REAL INCOME AND PRICES: EVIDENCE FROM TURKEY

Year 2007, Volume: 1 Issue: 2, 1 - 29, 01.06.2007

Abstract

Jıı this paper, we examine the causal relationship amongst changes in energy consumption, real
income growth and domestic inflation within the conditions of Turkish economy. Based on a
contemporaneous multivariate co-integrating estimation methodology, our estimation results
indicate that a distinction between various categories of enei'gy consumption needs to l>e made in
order for the causality issues of interest to be elucidated. We find as a vital point to be emphasized
that domestic inflationary framework is highly endogenous to all the model constructions and thus
subject to the changes in especially enei'gy consumption. It is also significant that there seems to
be a long-ran causal relationship between the variables when the levels of industrial consumption
are used as the relevant enei'gy consumption data since they have highly endogenous
characteristics against each other within the causality analysis. We conclude that energy policies
ex-ante designed have the power of affecting domestic inflation significantly. We also suggest
that, for the case of industrial energy consumption data, energy conservation policies may lead to
harmful results for the real income growth process though the latter issue is not the relevant case
for the residential and commercial enei'gy consumption and total enei'gy consumption data.

References

  • AKARCA, A T. and LONG, T.V. (1980), "On the Relationship between Energy and GNP: A Reexamination", Journal of Energy and Development, 5, 326-33.
  • AL-IRIANI, M. (2006), "Energy-GDP Relationship Revisited: An Example from GCC Countries Using Panel Causality", Energy Polity, 34, 3342-3350.
  • ANDERSON, R. G., HOFFMAN, D. and RASCHE, R. H. (1998), ",4 Vector Error Correction Forecasting Model of the U.S. economy", The Federal Reserve Bank of St Louis Working Paper, 98-008A, May.
  • ASAFU-ADJAYE, J. (2000), "The Relationship between Energy Consumption, Energy Prices and Economic Growth: Time Series Evidence from Asian Developing Countries", Energy Economics, 22, 615-625.
  • DICKEY, D.A. and FULLER, W.A. (1979), "Distribution of the Estimators for Autoregressive Time Series with a Unit Root", Journal of the American Statistical Association, 74, 427-431.
  • DICKEY, D.A. and FULLER, W.A. (1981), "Likelihood Ratio Statistics for Autoregressive Time Series with Unit Roots", Econometrica, 49, July, 1057-1072.
  • DICKEY, D. A., JANSEN, D. W. and THORNTON, D. L. (1991), ".4 Primer on Cointegration uith an Application to Money and Income", The Federal Reserve Bank of St. Louis Review, March/April, 58-78.
  • DOORNIK, J.A., HENDRY, D.F. and NIELSEN, B. (1998), "Inference in Cointegrating Models: UK Ml Revisited", Journal of Economic Surveys, 12/5, 533-572.
  • ELLIOTT, G„ ROTHENBERG, T.J. and STOCK, J.H. (1996), "Efficient Tests for an Autoregressive Unit Root" , Econometrica, 64, 813-836.
  • ENDERS, W. (2004), Applied Econometric Time Series, John Wiley & Sons, Inc.
  • ENGLE, R. F. and GRANGER. C. W. J. (1987), "Co-integration and Error Correction: Representation, Estimation, and Testing", Econometrica, 55, 251-276.
  • EROL, U and YU, E.S.H. (¡987), "On the Causal Relationship between Energy and Income for Industrialized Countries", Journal of Energy and Development, 13, 113-122.
  • GHAU, K.H. and EL-SAKKA, M.I.T. (2004), "Energy Use and Output Growth in Canada: A Multivariate Cointeg ration Analysis", Energy Economics, 26, 225-238.
  • GLASURE, YONG U. and LEE, Aie-Rie (1997), "Cointegration, Errorcorrection, and the Relationship between GDP and Energy: The Case of South Korea and Singapore ", Resource and Energy Economics, 20, 17-25.
  • GONZALO, J. (1994), "Five Alternative Methods of Estimating Long-run Equilibrium Relationships ", Journal of Econometrics, 60, 203-233.
  • GRANGER, C.W.J. (1969), "Investing Causal Relations by Econometric Models and Cross Spectra! Methods", Econometrica, 37, 424-438.
  • GRANGER, C. W. J. (1986), "Developments in the Study of Cointegrated Economic Variables", Oxford Bulletin of Economics and Statistics, 48/3, 213-228.
  • IS. GRANGER, C.W.J. (1988), "Some Recent Developments in a Concept of Causality", Journal of Econometrics, 39, 199-211.
  • GRANGER, C.W.J, and NEWBOLD, P. (1974), "Spurious Regressions in Economics, Journal of Econometrics, 2/2, 111-120.
  • HARRIS, R.I.D. (1995), Using Cointegration Analysis in Econometric Modelling, Prentice Hall.
  • HENDRY, D. F. (1986), "Econometric Modelling with Cointegrated Variables: An Overview", Oxford Bulletin of Economics and Statistics, 48/3, 201-212.
  • HONDROYIANNIS. G„ LOWS. S. and PAPAPETROU. E. (2 002). "Energy Consumption and Economic Growth: Assessing the Evidence from Greece", Energy Economics, 24, 319-336.
  • HWANG, D.B.K. and GUM, B. (1992), "The Causal Relationship between Energy and GNP: The Case of Taiwan", Journal of Energy and Development, 16, 219- 226.
  • JOHANSEN, S. (1988), "Statistical Analysis of Cointegration Vectors", Journal of Economic Dynamics and Control, 12, 231-254.
  • JOHANSEN, S. (1992), "Determination of Cointegration Rank in the Presence of a Linear Trend", Oxford Bulletin of Economics and Statistics, 54/3, 383-397.
  • JOHANSEN, S. (1995). Likelihood-based Inference in Cointegrated Vector Autoregressive Models, Oxford University Press.
  • JOHANSEN, S. and JUSELIUS, K. (1990), "Maximum Likelihood Estimation and Inference on Cointegration-with Applications to the Demand for Money", Oxford Bulletin of Economics and Statistics, 52, 169-210.
  • JOHANSEN, S. and JUSELIUS, K. (1992), "Testing Structural Hypotheses in a Multivariate Cointegration Analysis of the PPP and the UIP for UK", Journal of Econometrics, 53, 211-244
  • JUMBE, C.B.L, (2004), "Electricity Consumption and GDP: Empirical Evidence from Malawi", Energy Economics, 26, 61-68.
  • KRAFT, J. and KRAFT, .4. (1978), "On the Relationship between Energy and GNP", Journal of Energy and Development, 3, 401-403.
  • LEE, C.-C. (2005), "Energy Consumption and GDP in Developing Countries: .4 Cointegrated Panel Analysis", Energy Economics, 27, 415-127.
  • MACKINNON, J.G. (1991), "Critical Values for Cointegration Tests", Long-run Economic Relationships: Readings in Cointegration, Ch. 13 (Eds. R. F. Engle and C. W. J. Granger) , Oxford: Oxford University Press.
  • MACKINNON, J.G. (1996), "Numerical Distribution Functions for Unit Root and Coin! eg ration Tests", Journal of Applied Econometrics, 11, 601-618.
  • MAHADEVA, L. and ROBINSON. P. (2004), "Unit Root Testing to Help Model Building", Handbooks in Central Banking, (Eds. Andrew Blake and Gill Hammond), Centre for Central Banking Studies, Bank of England, No. 22, July.
  • MASIH, A.M.M. and MASIH, R. (1996), "Energy Consumption, Real Income and Temporal Causality: Results from a Multi-country Study Based on Cointegration and Error-correction Modelling Techniques", Energy Economics, 18, 165-183.
  • MASIH, A.M.M. and MASIH, R. (1997), "On the Temporal Causal Relationship between Energy Consumption, Real Income, and Prices: Some New Evidence from Asian-Energy Dependent NICs Based on a Multivariate Cointegration/Vector Error Correction Approach", Journal of Policy Modeling, 19/4, 417-440.
  • MASIH, A.M.M. and MASIH, R. (1998), "A Multivariate Cointegrated Modelling Approach in Testing Temporal Causality between Energy Consumption, Real Income and Prices with an Application to Two Asian LDCs", Applied Economics, 30, 1287-1298.
  • MEHRARA, M. (2007), "Energy Consumption and Economic Growth: The Case of Oil Exporting Countries", Energy Policy, 35, 2939-2945.
  • NELSON, C. and PLOSSER, C. (1982), "Trend and Random Walks in Macroeconomic Time Series: Some Evidence and Implications", Journal of Monetary Economics, 10, 130-162.
  • OH, W. and LEE, K. (2004), ''Energy Consumption and Economic Growth in Korea: Testing the Causality Relation", Journal of Polity Modeling, 26, 973-981.
  • Prime Ministry Republic of Turkey Turkish Statistical Institute (2006), Statistical Indicators 1923-2005, December.
  • QMS (2004), EViews 5 User's Guide. April.
  • SIMS, C. (1972), "Money, Income and Causality", American Economic Review, 62, 540-552.
  • SOTTAS, U. and SARI, R. (2003), "Energy Consumption and GDP: Causality Relationship in G-7 Countries and Emerging Markets", Energy Economics, 25, 33- 37.
  • YU, E.S.H. and JIN, B.K. (1984), "The Relationship between Energy and GNP: Further Results", Energy Economics, 6, 168-190.
  • YU, E.S.H. and CHOI, J.Y. (1985), "The Causal Relationship between Energy and GNP: An International Comparison", Journal of Energy and Development, 10, 249-272.
  • YU, ES.H. and JIN, J.C. (1992), "Cointegration Tests of Energy Consumption, Income and Employment", Resources and Energy, 14, 259-266.
  • YULE, G. (1926), "Why do We Sometimes Get Nonsense Correlations between Time Series? .4 Study in Sampling and the Nature of Time Series", Journal of Royal Statistical Society, 89, 1-64.

TESTING CAUSAL RELATIONSHIPS BETWEEN ENERGY CONSUMPTION, REAL INCOME AND PRICES: EVIDENCE FROM TURKEY

Year 2007, Volume: 1 Issue: 2, 1 - 29, 01.06.2007

Abstract

Bu çalışmada, enerji tüketimindeki değişimler, reeel gelir büyümesi ve yurtiçi enflasyon arasındaki nedensellik ilişkileri Türkiye ekonomisi koşullarında araştırılmaktadır. Çağdaş çok değişkenli eşbütünleşim tahmin yöntemi kullanılarak elde ettiğimiz bulgular, enerji tüketiminin araştırılan nedensellik ilişkilerinin aydınlatılabilmesi için, çeşitli kategorilere ayrıştırılması gerektiğini göstermektedir. Vurgulanması gereken temel bulgularımız, yurtiçi enflasyonist yapının oluşturulan modeller için oldukça içsel bir yapıya sahip ve özellikle enerji tüketimindeki değişikliklere karşı duyarlı ve sanayi tüketimi uygun enerji tüketim verisi olarak dikkate alındığı zaman, nedensellik çözümlemesi içerisinde birbirlerine karşı oldukça içsel bir yapıda tahmin edilen değişkenlerin uzun dönemli bir nedensellik ilişkisi içerisinde oldukları şeklinde belirtilebilir. Sonuç olarak, beklentiler doğrultusunda tasarlanan enerji politikalarının ekonomi içerisinde belirleyici bir şekilde yurtiçi enflasyonu etkileme gücüne sahip olduğu ve ev halkının kullanım amacına yönelik ya da ticari içerikli enerji tüketiminin, toplam enerji tüketiminden ziyade sanayi enerji tüketimi dikkate alındığı zaman, enerji tasarruf politikalarının reel gelir büyüme süreci açısından zararlı olabilecek sonuçlar meydana getirebileceği görülmektedir.

References

  • AKARCA, A T. and LONG, T.V. (1980), "On the Relationship between Energy and GNP: A Reexamination", Journal of Energy and Development, 5, 326-33.
  • AL-IRIANI, M. (2006), "Energy-GDP Relationship Revisited: An Example from GCC Countries Using Panel Causality", Energy Polity, 34, 3342-3350.
  • ANDERSON, R. G., HOFFMAN, D. and RASCHE, R. H. (1998), ",4 Vector Error Correction Forecasting Model of the U.S. economy", The Federal Reserve Bank of St Louis Working Paper, 98-008A, May.
  • ASAFU-ADJAYE, J. (2000), "The Relationship between Energy Consumption, Energy Prices and Economic Growth: Time Series Evidence from Asian Developing Countries", Energy Economics, 22, 615-625.
  • DICKEY, D.A. and FULLER, W.A. (1979), "Distribution of the Estimators for Autoregressive Time Series with a Unit Root", Journal of the American Statistical Association, 74, 427-431.
  • DICKEY, D.A. and FULLER, W.A. (1981), "Likelihood Ratio Statistics for Autoregressive Time Series with Unit Roots", Econometrica, 49, July, 1057-1072.
  • DICKEY, D. A., JANSEN, D. W. and THORNTON, D. L. (1991), ".4 Primer on Cointegration uith an Application to Money and Income", The Federal Reserve Bank of St. Louis Review, March/April, 58-78.
  • DOORNIK, J.A., HENDRY, D.F. and NIELSEN, B. (1998), "Inference in Cointegrating Models: UK Ml Revisited", Journal of Economic Surveys, 12/5, 533-572.
  • ELLIOTT, G„ ROTHENBERG, T.J. and STOCK, J.H. (1996), "Efficient Tests for an Autoregressive Unit Root" , Econometrica, 64, 813-836.
  • ENDERS, W. (2004), Applied Econometric Time Series, John Wiley & Sons, Inc.
  • ENGLE, R. F. and GRANGER. C. W. J. (1987), "Co-integration and Error Correction: Representation, Estimation, and Testing", Econometrica, 55, 251-276.
  • EROL, U and YU, E.S.H. (¡987), "On the Causal Relationship between Energy and Income for Industrialized Countries", Journal of Energy and Development, 13, 113-122.
  • GHAU, K.H. and EL-SAKKA, M.I.T. (2004), "Energy Use and Output Growth in Canada: A Multivariate Cointeg ration Analysis", Energy Economics, 26, 225-238.
  • GLASURE, YONG U. and LEE, Aie-Rie (1997), "Cointegration, Errorcorrection, and the Relationship between GDP and Energy: The Case of South Korea and Singapore ", Resource and Energy Economics, 20, 17-25.
  • GONZALO, J. (1994), "Five Alternative Methods of Estimating Long-run Equilibrium Relationships ", Journal of Econometrics, 60, 203-233.
  • GRANGER, C.W.J. (1969), "Investing Causal Relations by Econometric Models and Cross Spectra! Methods", Econometrica, 37, 424-438.
  • GRANGER, C. W. J. (1986), "Developments in the Study of Cointegrated Economic Variables", Oxford Bulletin of Economics and Statistics, 48/3, 213-228.
  • IS. GRANGER, C.W.J. (1988), "Some Recent Developments in a Concept of Causality", Journal of Econometrics, 39, 199-211.
  • GRANGER, C.W.J, and NEWBOLD, P. (1974), "Spurious Regressions in Economics, Journal of Econometrics, 2/2, 111-120.
  • HARRIS, R.I.D. (1995), Using Cointegration Analysis in Econometric Modelling, Prentice Hall.
  • HENDRY, D. F. (1986), "Econometric Modelling with Cointegrated Variables: An Overview", Oxford Bulletin of Economics and Statistics, 48/3, 201-212.
  • HONDROYIANNIS. G„ LOWS. S. and PAPAPETROU. E. (2 002). "Energy Consumption and Economic Growth: Assessing the Evidence from Greece", Energy Economics, 24, 319-336.
  • HWANG, D.B.K. and GUM, B. (1992), "The Causal Relationship between Energy and GNP: The Case of Taiwan", Journal of Energy and Development, 16, 219- 226.
  • JOHANSEN, S. (1988), "Statistical Analysis of Cointegration Vectors", Journal of Economic Dynamics and Control, 12, 231-254.
  • JOHANSEN, S. (1992), "Determination of Cointegration Rank in the Presence of a Linear Trend", Oxford Bulletin of Economics and Statistics, 54/3, 383-397.
  • JOHANSEN, S. (1995). Likelihood-based Inference in Cointegrated Vector Autoregressive Models, Oxford University Press.
  • JOHANSEN, S. and JUSELIUS, K. (1990), "Maximum Likelihood Estimation and Inference on Cointegration-with Applications to the Demand for Money", Oxford Bulletin of Economics and Statistics, 52, 169-210.
  • JOHANSEN, S. and JUSELIUS, K. (1992), "Testing Structural Hypotheses in a Multivariate Cointegration Analysis of the PPP and the UIP for UK", Journal of Econometrics, 53, 211-244
  • JUMBE, C.B.L, (2004), "Electricity Consumption and GDP: Empirical Evidence from Malawi", Energy Economics, 26, 61-68.
  • KRAFT, J. and KRAFT, .4. (1978), "On the Relationship between Energy and GNP", Journal of Energy and Development, 3, 401-403.
  • LEE, C.-C. (2005), "Energy Consumption and GDP in Developing Countries: .4 Cointegrated Panel Analysis", Energy Economics, 27, 415-127.
  • MACKINNON, J.G. (1991), "Critical Values for Cointegration Tests", Long-run Economic Relationships: Readings in Cointegration, Ch. 13 (Eds. R. F. Engle and C. W. J. Granger) , Oxford: Oxford University Press.
  • MACKINNON, J.G. (1996), "Numerical Distribution Functions for Unit Root and Coin! eg ration Tests", Journal of Applied Econometrics, 11, 601-618.
  • MAHADEVA, L. and ROBINSON. P. (2004), "Unit Root Testing to Help Model Building", Handbooks in Central Banking, (Eds. Andrew Blake and Gill Hammond), Centre for Central Banking Studies, Bank of England, No. 22, July.
  • MASIH, A.M.M. and MASIH, R. (1996), "Energy Consumption, Real Income and Temporal Causality: Results from a Multi-country Study Based on Cointegration and Error-correction Modelling Techniques", Energy Economics, 18, 165-183.
  • MASIH, A.M.M. and MASIH, R. (1997), "On the Temporal Causal Relationship between Energy Consumption, Real Income, and Prices: Some New Evidence from Asian-Energy Dependent NICs Based on a Multivariate Cointegration/Vector Error Correction Approach", Journal of Policy Modeling, 19/4, 417-440.
  • MASIH, A.M.M. and MASIH, R. (1998), "A Multivariate Cointegrated Modelling Approach in Testing Temporal Causality between Energy Consumption, Real Income and Prices with an Application to Two Asian LDCs", Applied Economics, 30, 1287-1298.
  • MEHRARA, M. (2007), "Energy Consumption and Economic Growth: The Case of Oil Exporting Countries", Energy Policy, 35, 2939-2945.
  • NELSON, C. and PLOSSER, C. (1982), "Trend and Random Walks in Macroeconomic Time Series: Some Evidence and Implications", Journal of Monetary Economics, 10, 130-162.
  • OH, W. and LEE, K. (2004), ''Energy Consumption and Economic Growth in Korea: Testing the Causality Relation", Journal of Polity Modeling, 26, 973-981.
  • Prime Ministry Republic of Turkey Turkish Statistical Institute (2006), Statistical Indicators 1923-2005, December.
  • QMS (2004), EViews 5 User's Guide. April.
  • SIMS, C. (1972), "Money, Income and Causality", American Economic Review, 62, 540-552.
  • SOTTAS, U. and SARI, R. (2003), "Energy Consumption and GDP: Causality Relationship in G-7 Countries and Emerging Markets", Energy Economics, 25, 33- 37.
  • YU, E.S.H. and JIN, B.K. (1984), "The Relationship between Energy and GNP: Further Results", Energy Economics, 6, 168-190.
  • YU, E.S.H. and CHOI, J.Y. (1985), "The Causal Relationship between Energy and GNP: An International Comparison", Journal of Energy and Development, 10, 249-272.
  • YU, ES.H. and JIN, J.C. (1992), "Cointegration Tests of Energy Consumption, Income and Employment", Resources and Energy, 14, 259-266.
  • YULE, G. (1926), "Why do We Sometimes Get Nonsense Correlations between Time Series? .4 Study in Sampling and the Nature of Time Series", Journal of Royal Statistical Society, 89, 1-64.
There are 48 citations in total.

Details

Primary Language English
Journal Section Review Article
Authors

Cem Saatcioglu This is me

H. Levent Korap This is me

Publication Date June 1, 2007
Published in Issue Year 2007 Volume: 1 Issue: 2

Cite

APA Saatcioglu, C., & Korap, H. L. (2007). TESTING CAUSAL RELATIONSHIPS BETWEEN ENERGY CONSUMPTION, REAL INCOME AND PRICES: EVIDENCE FROM TURKEY. Beykent Üniversitesi Sosyal Bilimler Dergisi, 1(2), 1-29.

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