Levent, Korap (2007): Testing causal relationships between energy consumption, real income and prices: evidence from Turkey. Published in: Beykent University Journal of Social Sciences , Vol. 1, No. 2 (2007): pp. 1-29.
Download (174kB) | Preview
In this paper, we examine the causal relationships between the changes in energy consumption, real income growth and domestic inflation within the conditions of the Turkish economy. Based on a contemporaneous multivariate co-integrating estimation methodology, our estimation results indicate that a distinction between various categories of energy consumption needs to be made in order for the causality issues of interest to be elucidated. We find as a vital point to be emphasized that domestic inflationary framework is highly endogenous to all the model constructions and thus subject to the changes in especially energy consumption. It is also significant that there seems to be a long-run causal relationship between the variables when the levels of industrial consumption are used as the relevant energy consumption data since they have highly endogenous characteristics against each other within the causality analysis. We conclude that energy policies ex-ante designed have the power of affecting domestic inflation significantly. We also suggest that, for the case of industrial energy consumption data, energy conservation policies may lead to harmful results for the real income growth process though the latter issue is not the relevant case for the residental and commercial energy consumption and total energy consumption data.
|Item Type:||MPRA Paper|
|Original Title:||Testing causal relationships between energy consumption, real income and prices: evidence from Turkey|
|English Title:||Testing causal relationships between energy consumption, real income and prices: evidence from Turkey|
|Keywords:||Energy Consumption ; Real Income ; Prices ; Causality ; Turkish Economy ;|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models
N - Economic History > N7 - Transport, Trade, Energy, Technology, and Other Services > N70 - General, International, or Comparative
|Depositing User:||Levent Korap|
|Date Deposited:||07. Apr 2010 06:09|
|Last Modified:||30. Dec 2015 14:36|
Akarca, A.T. and Long, T.V. (1980), “On the Relationship between Energy and GNP: A Reexamination”, Journal of Energy and Development, 5, 326-331.
Al-Iriani, M. (2006), “Energy-GDP Relationship Revisited: An Example form GCC Countries Using Panel Causality”, Energy Policy, 34, 3342-3350.
Anderson, R.G., Hofman, D. and Rasche, R.H. (1998), “A Vector Error Correction Forecasting Model of the U.S. Economy”, The Federal Reserve Bank of St Louis Working Paper, 98-008A, May.
Asafu-Adjaye, J. (2000), “The Relationship between Energy Consumption, Energy Prices and Economic Growth: Time Series Evidence from Asian Developing Countries”, Energy Economics, 22, 615-625.
Dickey, D.A. and Fuller, W.A. (1979), “Distribution of the Estimators for Autoregressive Time Series with a Unit Root”, Journal of American Statistical Association, 74, 427-431.
Dickey, D.A. and Fuller, W.A. (1981), “Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root”, Econometrica, 49, July, 1057-1072.
Dickey, D.A., Jansen, D.W. and Thornton, D.L. (1991), “A Primer on Cointegration with an Application to Money and Income”, The Federal Reserve Bank of St Louis Review, March-April, 58-78.
Doornik, J.A., Hendry, D.F. and Nielsen, B. (1998), “Inference in Cointegrating Models: UK M1 Revisited”, Journal of Economic Surveys, 12/5, 533-572.
Elliot, G., Rothenberg, T.J. and Stock, J.H. (1996), “Efficient Tests for an Autoregressive Unit Root”, Econometrica, 64, 813-836.
Enders, W. (2004), Applied Econometric Time Series, John Wiley & Sons, Inc.
Engle, R.F. and Granger, C.W.J. (1987), “Co-integration and Error Correction: Representation, Estimation, and Testing”, Econometrica, 55, 251-276.
Erol, U. and Yu, E.S.H. (1987), “On the Causal Relationship between Energy and Income for Industrialized Countries”, Journal of Energy and Development, 13, 113-122.
Ghali, K.H. and El-Sakka, M.I.T. (2004), “Energy Use and Output Growth in Canada: A Multivariate Cointegration Analysis”, Energy Economics, 26, 225-238.
Glasure, Yong U. and Lee, Aie-Rie (1997), “Cointegration, Error-correction, and the Relationship between GDP and Energy: The Case of South Korea and Singapore”, Resource and Energy Economics, 20, 17-25.
Gonzalo, J. (1994), “Five Alternative Methodsof Estimating Long-run Equilibrium Relationships”, Journal of Econometrics, 60, 203-233.
Granger, C.W.J. (1969), “Investigating Causal Relations by Econometric Modelsand Cross Spectral Methods”, Econometrica, 37, 424-438.
Granger, C.W.J. (1986), “Developments in the Study of Cointegrated Economic Variables”, Oxford Bulletin of Economics and Statistics, 48/3, 213-228.
Granger, C.W.J. (1988), “Some Recent Developments in a Concept of Causality”, Journal of Econometrics, 39, 199-211.
Granger, C.W.J. and Newbold, P. (1974), “Spurious Regressions in Economics”, Journal of Econometrics, 2/2, 111-120.
Harris, R.I.D. (1995), Using Cointegration Analysisin Econometric Modelling, Prentice Hall.
Hendry, D.F. (1986), “ Econometric Modelling with Cointegrated Variables: An Overview”, Oxford Bulletin of Economics and Statistics, 48/3, 201-212.
Hondroyiannis, G., Lolos, S. and Papapetrou, E. (2002), “Energy Consumption and Economic Growth: Assessing the Evidence form Greece”, Energy Economics, 24, 319-336.
Hwang, D.B.K. and Gum, B. (1992), “The Causal Relationship between Energy and GNP: The Case of Taiwan”, Journal of Energy and Development, 16, 219-226.
Johansen, S. (1988), “Statistical Analysis of Cointegration Vectors”, Journal of Economic Dynamics and Control, 12, 231-254.
Johansen, S. (1992), “Determination of Cointegration Rankin the Presence of a Linear Trend”, Oxford Bulletin of Economics and Statistics, 54/3, 383-397.
Johansen, S. (1995), Likelihood-based Inference in Cointegrated Vector Autoregressive Models, Oxford University Press.
Johansen, S. and Juselius, K. (1990), “Maximum Likelihood Estimation and Inference on Cointegration-with Applications to the Demand for Money”, Oxford Bulletin of Economics and Statistics, 52, 169-210.
Johansen, S. and Juselius, K. (1992), “Testing Structural Hypothesis in a Multivariate Cointegration Analysisof the PPP and the UIP for UK”, Journal of Econometrics, 53, 211-244.
Jumbe, C.B.L. (2004), “Electricity Consumption and GDP: Empirical Evidence from Malawi”, Energy Economics, 26, 61-68.
Kraft, J. and Kraft, A. (1978), “On the Relationship between Energy and GNP”, Journal of Energy and Development, 3, 401-403.
Lee, C.-C. (2005), “Energy Consumption and GDP in Developing Countries: A Cointegrated Panel Analysis”, Energy Economics, 27, 415-427.
Mackinnon, J.G. (1991), “Critical Values for Cointegration Tests”, Long-run Economic Relationships: Reading in Cointegration, Ch. 13 (Eds. R.F. Engle and C.W.J. Granger), Oxford: Oxford University Press.
Mackinnon, J.G. (1996), “Numeical Distribution Functions for Unit Root and Cointegration Tests”, Journal of Applied Econometrics, 11, 601-618.
Mahadeva, L. and Robinson, P. (2004), “Unit Root Testing to Help Model Building”, Handbooks in Central Banking, (Eds. Andrew Blake and Gill Hammond), Centre for Central Banking Studies, Bank of England, No. 22, July.
Masih, A.M.M. and Masih, R. (1996), “Energy Consumption, Real Income and Temporal Causality: Results from a Multi-country Study Based on Cointegration and Error-correction Modelling Techniques”, Energy Economics, 18, 165-183.
Masih, A.M.M. and Masih, R. (1997), “On the Temporal Causal Relationship between Enegy Consumption, Real Income and Prices: Some New Evidence from Asian-Energy Dependent NICs Bsed on a Multivariate Cointegration / Vector Error Correction Approach”, Journal of Policy Modeling, 19/4, 417-440.
Masih, A.M.M. and Masih, R. (1998), “A Multivariate Cointegrated Modelling Approach in Testing Temporal Causality between Energy Consumption, Real Income and Prices with an Application to Two Asian LDCs”, Applied Economics, 30, 1287-1298.
Mehrara, M. (2007), “Energy Consumption and Economic Growth: The Case of Oil Exporting Countries”, Energy Policy, 35, 2939-2945.
Nelson, C. and Plosser, C. (1982), “Trend and Random Walks in Macroeconomic Time Series: Some Evidence and Implications”, Journal of Monetary Economics, 10, 130-162.
Oh, W. and Lee, K. (2004), “Energy Consumption and Economic Growthin Korea: Testing the Causality Relation”, Journal of Policy Modeling, 26, 973-981.
Prime Ministry Republic of Turkey Turkish Statistical Institute (2006), Statistical Indicators 1923-2005, December.
QMS (2004), EViews 5 User’s Guide, April.
Sims, C. (1972), “Money, Income and Causality”, American Economic Review, 62, 540-552.
Soytas, U. and Sarı, R. (2003), “Energy Consumption and GDP: Causality Relationship in G-7 Countries and Emerging Markets”, Energy Economics, 25, 33-47.
Yu, E.S.H. and Jin, B.K. (1984), “The Relationship between Energy and GNP: Further Results”, Energy Economics, 6, 168-190.
Yu, E.S.H. and Choi, J.Y. (1985), “The Causal Relationship between Energy and GNP: An International Comparison”, Journal of Energy and Development, 10, 249-272
Yu, E.S.H and Jin, J.C. (1992), “Cointegration Tests of Energy Consumption, Income and Employment”, Resources and Energy, 14, 259-266.
Yule, G. (1926), “Why do We Sometimes Get Nonsense Correlations between Time Series? A Study in Sampling and the Nature of Time Series”, Journal of Royal Statistical Society, 89, 1-64.