Abstract

1. LITERATURE
In the following section we discuss the literature that examine the effects of energy consumption and economic growth on the current account deficit. These studies generally show that energy consumption and economic growth have a positive effect on the current account deficit. For example:
Stern, (1993) examines the relationship between energy consumption and economic growth for the US economy. Using the Granger causality test, the author addresses the period 1947-1990. His research shows that energy consumption is the cause of economic growth. Chuku et al., (2011) covers 1970-2008 period. They analyse the causality between oil prices and the current account deficit for the Nigerian economy. As a result of their test with the VAR method, they have found that there is a significant causal relationship between oil price shocks and the current account balance. Erol and Güneş (2017) analyse the relationship between energy imports, economic growth and the current account deficit in Turkish context. Researchers covers the period between 1990-2015 in their studies and made their analysis by using the Johansen cointegration test. The authors find that there is a long-term relationship between the variables, that is to say, as energy consumption increases, growth also increases. Barbaros et al. (2018) investigate the effects of economic growth and energy consumption on the current account balance in Turkish context. The study uses VAR model and discusses variables such as economic growth, energy consumption and current account deficit. The authors cover the period between 1980-2013. They do not find any causal relationship between the variables.
This study is designed to analyse the impacts of energy consumption and economic growth on the current account deficit in Turkey. In line with the purpose of the study, current account deficit (CAD), per capita, energy consumption (ENCN) and economic growth (GDP) variables are discussed. Real national income per capita is used to represent economic growth. In the study, the period between1974-2015 is selected due to the accessibility of the data. These series of variables are obtained annually from the World Bank database. Unlike the empirical studies about the current account deficit and its determinants in the literature, this study specifically addresses the variables that are considered to play a greater role in the current deficit. In addition to this, it uses different models and different periods. In the study, where the Augmented-Dickey Fuller (ADF) and Philips-Perron (PP) unit root tests are applied, the series became stable when their first differences were taken. As a result of the subsequent Granger causality analysis, a significant causality relationship was found at a level of 5% significance from both economic growth and energy consumption to the current account deficit.
2. DESIGN AND METHOD
This part of the study explains the variables that are used in the analysis. These variables are energy consumption and economic growth, which have a significant impact on the current account deficit. CAD represents the current account deficit, ENCN represents per capita energy consumption and GDP represents economic growth. Real national income per capita represents the economic growth. The analysis covers the period between 1974-2015. There are two factors behind this decision: data availability and outward oriented policies that are dominant in Turkish economy during 1980s. The data are taken from the World Bank database. In the analysis of the series, Eviews 7.2. program was used.
3. FINDINGS AND DISCUSSION
Granger causality test was applied after taking the first differences of the series of variables and making them stable. When the results are analysed, a significant causality relationship has been found at the level of 5% significance from both economic growth and energy consumption to the current account deficit. This finding is an expected result. However, apart from this, there is no causal relationship between the other variables. There is no causality relationship from current account deficit and energy consumption to economic growth as well as economic growth and current account deficit to energy consumption.
4. CONCLUSION, RECOMMENDATIONS AND LIMITATIONS
This study investigates Turkey’s economy between 1974 and 2020. It analyses the impact of energy consumption and economic growth on the current account deficit. Next part discusses its findings:
ADF and PP stability tests show that the series became stationary in their first differences. According to the Granger causality test results after the stationary analysis; a significant causality relationship was found at 5% significance level from both economic growth and energy consumption to the current account deficit. In other words, economic growth and increase in energy consumption cause the current deficit to increase. Considering the general structure of Turkey's economy these findings are expected. However, apart from this causal relationship, no causal relationship was found between other variables. Because in the analysis, oil prices are used as a variable. In addition, since annual data were used as the frequency range, the number of observations is low. These findings are consistent with Erbaykal (2007), Tatlıyer (2014), Atış ve Saygılı (2014), Çağlar et al. (2017)
Our findings show that Turkey should be directed to alternative energy sources. The energy required for growth must be used economically. Particularly, careful use of primary energy sources will increase energy savings. In order to reach this aim, production of renewable energy sources and domestic production opportunities should be increased. Likewise, instead of high and unstable economic growth to reduce energy consumption, economic models that provide sustainable and stable economic growth need to be introduced.
Additionally, prevention of current account deficit can be achieved through structural reforms. Namely, several arrangements can be made in foreign trade policy, monetary policy and fiscal policy practices. For example, imports of intermediate goods used in production and amount of raw materials can be minimized by means of foreign trade policy instruments. Reducing the demand for goods that increase current account deficit through macro policies can also be considered as another measure. The study will be beneficial for policy makers, researchers and related institutions and individuals. Studies with different models, different periods, different variables, different frequencies, and different countries will obviously contribute to the existing literature.