Causality Between Electricity Consumption and Economic Growth in Turkey: An ARDL Bounds Testing Approach

Abstract

Turkey is a candidate for becoming a European Union member and has an important geopolitical position for energy sources; hence, the increasing attention given to electric consumption and economic growth in Turkey has been seen in energy journals. In this study, the nexus between electricity consumption and economic growth for Turkey is examined by using the autoregressive distributed lag bound test. After we concluded that there was a long-run relationship between electricity consumption-gross domestic product (GDP) and vice versa, we also found that electricity consumption has a positive and a statistically significant impact on Turkey's economic growth and vice versa. In order to examine causality between electricity consumption-GDP, the Granger test was employed and while we concluded that while the neutrality hypotheses is valid for the short run in Turkey, there exists bidirectional Granger causality between electricity consumption and GDP which confirms the feedback hypothesis for the long run.