The relationship between energy consumption and selected macroeconomic variables in Turkey: ARDL bounds test analysis

The main objective of this study is to investigate potential short and long run relationships among energy consumption and selected macroeconomic variables, namely economic growth, employment, inflation, exports and imports for the case of Turkey by using yearly data over the period 1960-2015. The results of the Zivot-Andrews unit root test, which was applied to determine the stationarity properties of the variables in question, reveal that the variables studied were integrated of different order. Therefore, the ARDL bounds test approach to cointegration was employed to investigate the long run relationship among the variables. The bounds test results showed that economic growth, employment, inflation, exports and imports are the long run forcing variables of the energy use. Moreover, energy use, employment, inflation, exports and imports were also found to be the long run forcing variables of economic growth. The Granger non-causality test results, for the short run, revealed that there exist unidirectional causalities running from inflation to economic growth, from exports to economic growth, from imports to inflation and from employment to energy use. Moreover, bidirectional Granger causality was found between the variables, energy and economic growth, energy and inflation, energy and exports and energy and imports in the short run. The results of the Granger non-causality test suggest evidence of feedback relation between the variables energy use and economic growth in the long run. The empirical findings suggest that, policy makers should take into account that energy conservation policies may harm the economic growth while developing new energy policies designed to reduce energy consumption for Turkey. Keywords: Energy, Economic Growth, Cointegration, ARDL Bounds Test, Granger non-causality test.