Abstract:

This study explores the causal relationships between electricity consumption, real income and trade openness in Turkic Republics for 1992-2012 period by using second generation panel data methods under cross-sectional dependence. According to cross-sectional dependence tests, all variables and model are cross-sectionally dependent. According to the Smith et al. (2004) bootstrap unit root test, real income per capita and trade openness variables are stationary on level. On the contrary, electricity consumption variable is stationary in first difference. Therefore, cointegration tests have not been implemented in order to long-run relationships between variables. Causal relationships between variables have been examined by using Konya (2006) panel data causality approach which allows cross-sectional dependence and gives possibility to examine two explanatory variables’ effects on dependent variable and obtain country-specific results. The results can be summarized as follows: i) There exist a causal relationship between electricity consumption and real income. ii) There exist a causal relationship between trade openness and real income. iii) Electricity consumption and trade openness variables have more powerful common effects on real income.

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