Disaggregate energy consumption, employment and income in Turkey

Abstract

The purpose of this paper is to contribute to literature on energy consumption and economic growth relationship by examining how much of the variance in national income growth can be explained by the growth of different sources of energy consumption and employment in Turkey. We use the recently developed generalized forecast error variance decomposition technique of Koop et al. [J. Econom. 74 (1996) 119] and Pesaran and Shin [Econ. Lett. 58 (1998) 17] to determine the information content of the growth rate of energy consumption. Waste seems to have the largest initial impact, followed by oil. However, over a 3-year horizon lignite appears to explain the largest forecast error variance of GDP. The total energy consumption explains 21% of forecast error variance of GDP. Energy consumption appears to be almost as important as employment in Turkey. Therefore, policy-makers may be interested in identifying the energy dependencies of economic growth in allocating the energy investment budget.