The relationship between current account deficit and energy: An econometric analysis on Turkey

Turkey is a country that is highly dependent on foreign sources in terms of energy resources. Considering the increasing energy consumption, this dependency constantly increases the current account deficit of the country. However, the increase in the current account deficit may also have an impact on energy consumption. Therefore, the analysis of the effect of the increase in the current account deficit on energy consumption is important for determining the economic policies that will establish the current account deficit - energy - foreign dependency relationship at an optimal level. For this reason, the main purpose of the study is to determine the effect of the current account deficit on energy consumption by revealing the relationship between energy consumption and external balance. In the econometric model created for this purpose, the data between 1974-2018 in Turkey was used. While energy consumption is added to the model as a dependent variable; Current account deficit, economic growth, real effective exchange rate and foreign direct investment (FDI) are included in the model as independent variables. When the unit root tests are examined to determine the stationarity levels of the variables used, it has been determined that they are stationary at different levels. For this reason, the long-term relationship between the variables is tested with the ARDL limit test approach. According to the results obtained, the current account deficit affects the total energy consumption significantly and positively. The real effective exchange rate affects energy consumption significantly and negatively. The effect of economic growth and FDI on energy consumption is insignificant. The fact that the increase in the current account deficit increases energy consumption shows that the economic policies to be implemented to reduce the current account deficit may have a direct impact on energy consumption.