The Energy Consumption and Economic Growth Nexus: Regional Evidence from Turkey

Abstract

Scholars have extensively examined the causal relationship between energy consumption and economic growth, both in time series and panel data contexts, due to its significance for policymaking purposes. However, an exploration of the topic at regional level within countries is crucial. This scrutiny is essential due to the potential regional disparities in the link between energy consumption and growth, and the implications of these disparities for shaping and localizing energy policies. Accordingly, this study examines the cointegration and causality relationship between energy consumption and economic growth with Westerlund (2007) Panel Cointegration and Dumitrescu and Hurlin (2012) Panel Causality Tests for twelve regional groups in Turkey, for the period 2004-2021. According to the results, it is found that there is a cointegration linkage between energy consumption and economic growth in the long run and there is a unidirectional causality from energy consumption to economic growth in general term. Moreover, Kónya’s (2006) Bootstrap Panel Granger Causality Test reveals that the Growth Hypothesis holds true for the Istanbul, Western Marmara, and Northeastern Anatolia regions, suggesting a causal relationship from energy consumption to economic growth. Conversely, the Conservation Hypothesis applies to the Eastern Black Sea region, indicating the reverse direction of causality. Moreover, the results suggests that Feedback Hypothesis is evident in the Aegean and Mediterranean regions which implies causality both from energy consumption to growth and from growth to energy consumption. Finally the Neutrality Hypothesis is found to be valid for the other remaining six regions, indicating the absence of a causal relationship between the variables. © 2022, Nova Science Publishers, Inc.. All rights reserved.