The impact of financial development and energy consumption on economic growth in Turkey

The aim of this study is to theoretically and empirically analyze the impacts of financial development and energy consumption on economic growth in Turkey. In this context structural break analyses are conducted. Stationarity of the series is analyzed by Vogelsang and Perron (1998), Lee and Strazicich (2003) and Carrion-i-Silvestre et al. (2009) unit root tests and all the series are decided to be I(1). Existence of cointegration relationship between the series in the models is investigated by Gregory and Hansen (1996) and Maki (2012) cointegration tests and it is decided that there exists cointegration relationship between the series in the models. Structural break dates obtained by Maki (2012) cointegration test with multiple structural break are included in long and short run analysis via dummy variables. In the study, long run analyses are carried out by FMOLS, DOLS and CCR methods and it is determined that 1% increase in credit used by private sector, broad money supply and energy consumption raise economic growth by 0,13%, 0,13-0,24% and 0,40%, respectively. Short run analysis are also carried out by FMOLS, DOLS and CCR methods and it is found that credit given to private sector increases economic growth in the short run but the impact is lower than it is in the long run. Increases in broad money supply also positively affect economic growth in the short run but its effect is also lower than the long run. Moreover, effect of energy consumption on economic growth is higher in the short run. Error correction mechanisms of the models operate and, thus, the analyses are reliable. Causality relationships between the series are analyzed by VECM method it is found that one way causality from economic growth to energy consumption and money supply, one way causality from credit volume to energy consumption and money supply and two way causality between energy consumption and money supply in the long run in Turkey for 1960-2019 period. On the other hand, one way causality from credit volume to energy consumption and two way causality between energy consumption and money supply are determined in the short run in Turkey for the same period. According to the findings of this study, it is possible to state that credits given to private sector, monetary expansion and energy consumption increase economic growth. The impacts of credits given to private sector and monetary expansion is greater in the long run while the impact of energy consumption in greater in the short run.