The effect of energy on economic development: A practice on Turkey's economy

In this study, we investigate the relationship between energy consumption andeconomic growth in the period between 1970 and 2005. Although different econometricapproaches have been utilized in order to explore this link, we have tried to determine themethod that fitted the data best. First we have utilized the production function approach inorder to determine the contribution of energy as a factor of production to value added. Thenwe used Granger Causality test and VAR approach to investigate the link between energyconsumption and economic growth. Our emprical results show that there are significalrelationship between the factors of production function, capital, labor and energy, in theindustrial sector in Turkey for the period under investigation. In addition, Granger Causalitytest results point to a causal relationship between energy consumption and value added inindustrial sector.