Electricity consumption and economic growth: evidence from Turkey

Abstract

This study investigates the causal relationship between electricity consumption and real GDP in Turkey during the period of 1950-2000. Both of the series were found to be a stationary process around a structural break by the Zivot and Andrews test. Thus, two different methodologies have been employed to test the Granger non-causality: the Dolado-Lutkepohl test using the VARs in levels, and the standard Granger causality test using the detrended data. Both tests have yielded a strong evidence for unidirectional causality running from the electricity consumption to the income. This implies that the supply of electricity is vitally important to meet the growing electricity consumption, hence to sustain the economic growth in Turkey.