Abstract:

This research investigates the relationship between energy consumption (ENE), trade openness (TI) and economic growth (GDP) in the case of Turkey in the period 1970-2015. VECM is employed. The results suggest a long-run causality which is inferred from the statistically significant error term with GDP and ENE. However, short-run coefficients are not found to be significant in the case of GDP and TI equation. Moreover, the findings suggest that a percentage change in ENE will result in a 1.35% increase in real GDP per capita. While for TI, a percentage change in this variable will result in 0.13% decrease in GDP in the long-run. Hence, real GDP per capita is elastic to the change in energy consumption but inelastic to the change in TI. This paper summarizes in detail the policy implications and the recommendations for future research. At last, the diagnostic tests advocate the stability of the model.

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