Uğur Adıgüzel

Electricity Consumption and Economic Growth in Turkey: Cointegration, Linear and Nonlinear Granger Causality

The purpose of this study is to examine causal relationships between the electricity consumption and economic growth in Turkey for the period 1967–2007. To accomplish this purpose, we utilize three analytical tools in time series econometrics: The bounds testing cointegration approach, the linear Granger causality test and the nonlinear Granger causality test. We depart from the existing literature on the energy consumption and economic growth nexus in Turkey by testing nonlinearity in the series and carrying out the nonlinear Granger causality test. The cointegration analysis shows that the electricity consumption and economic growth are cointegrated in the long-run. The linear Granger causality test based on the error correction model shows the bi-directional Granger causality in both the short- and the long-run between the electricity consumption and economic growth in Turkey. After filtering out the linear properties of the series with cointegration analysis, we carry out the Brock, Dechert, and Scheinkman nonlinearity test and find evidence of nonlinearity in the series. Therefore, the inferences from the nonlinear Granger causality test are more appropriate than the linear Granger causality analysis for Turkey. The nonlinear causality analysis supports the neutrality hypothesis, implying that electricity conservation policy will not damage the growth in the Turkish economy.

The behavior of Turkish exchange rates: A panel data perspective

This paper investigates the behavior of Turkish exchange rates within the context of purchasing power parity (PPP) hypothesis by means of recent developments in the panel unit root testing procedures for ten Turkish real exchange rates during January 2002–May 2012. The unit root test which accounts for nonlinearity, smooth structural shifts, and cross-section dependency supports that PPP hypothesis holds for Eurozone and European countries (Denmark, Norway, Sweden, Switzerland, and United Kingdom), while it does not hold for non-European trading partners (Canada, Japan, Saudi Arabia, and USA). From the empirical results, we can conclude that PPP hypothesis holds in the countries which have the free trade agreement, while it is violated in the countries in which there are trade barriers and greater distance. The findings therefore provide policy implications for Turkey in determining equilibrium exchange rates with her major trading partners.