ENERGY CONSUMPTION, TRADE OPENNESS AND GROWTH NEXUS IN TURKEY: EVIDENCE FROM VECM

Year 2019, Volume: 20 Issue: 1, 1 - 12, 31.05.2019

Elma Satrovic

Abstract

ENERGY CONSUMPTION, TRADE OPENNESS AND GROWTH NEXUS IN TURKEY: EVIDENCE FROM VECM

Abstract

This
research investigates the relationship between energy consumption (ENE), trade
openness (TI) and economic growth (GDP) in the case of Turkey in the period
1970-2015. VECM is employed. The results suggest a
long-run causality which is inferred from the statistically significant error
term with GDP and ENE. However, short-run coefficients are not found to be
significant in the case of GDP and TI equation. Moreover, the findings suggest
that a percentage change in ENE will result in a 1.35% increase in real GDP per
capita. While for TI, a percentage change in this variable will result in 0.13%
decrease in GDP in the long-run. Hence, real GDP per capita is elastic to the
change in energy consumption but inelastic to the change in TI. This paper
summarizes in detail the policy implications and the recommendations for future
research. At last, the diagnostic tests advocate the stability of the model.

Keywords

economic growth, energy consumption, trade openness, Turkey, VECM

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