THE IMPACT OF TRADE OPENNESS ON ENERGY CONSUMPTION UNDER STRUCTURAL BREAKS: THE EXAMPLE OF TURKEY

Abstract

In this study, the effect of trade openness on energy consumption was investigated over the period of 1970-2015 in the example of Turkish economy. The DF-GLS, KPSS and Ng-Perron conventional unit root tests and Vogelsang-Perron unit root test with structural break were used to determine the stationary degrees of the variables. The results obtained from the unit root tests allowed the use of the ARDL bounds test to determine the long-term relationship between the series. Bounds test results supported the existence of a long-term relationship between the variables. According to the long run results, it was detected that trade opennes positively affected energy consumption. The causality relations between the variables were investigated by using Toda-Yamamoto causality analysis. The causality results found the existence of a bidirectional causality relationship between trade openness and energy consumption. The results can provide important policy recommendations for Turkish economy.