THE RELATIONSHIP BETWEEN ECONOMIC GROWTH, ENERGY CONSUMPTION AND TRADE OPENNESS: THE CASE OF SHANGHAI COOPERATION ORGANISATION COUNTRIES

Abstract

This paper aims to analyze the relationship between energy consumption, trade openness and economic growth for the countries of the Shanghai Cooperation Organization that have started to follow open foreign trade policies with the transition to market economy since the early 1990s. The study examines validity and aspect of the relationship between variables for the eight countries studied covering the period of 1990-2018 by using panel causality, panel cointegration and panel vector error correction model methods. According to the results of the study, there is a causal relationship among three variables mentioned. While there is a bidirectional causality between economic growth and trade openness and economic growth and energy consumption; there is unilateral causality between energy consumption and trade openness from trade openness to energy consumption. The results support long-term equilibrium among the variables, but the direction and validity of the relationship are different in the short term. Therefore, periodic differences need to be taken into consideration when determining the energy policies that will be implemented in the economic growth process by these countries’ policymakers.