The Link between Financial Development and Energy Consumption in Turkey: A Time Series Evidence

Abstract

This paper examines the relationship between financial development and energy consumption in case of Turkey during the period 1980-2015 by adding economic growth and urbanization to the energy consumption specification. The ARDL bounds test indicates the existence of a long run relationship among financial development, economic growth, urbanization and energy consumption under the structural breaks. The DOLS estimation results reveal that energy consumption is determined by urbanization and financial develoment, respectively. The Toda-Yamamoto causality analysis indicates the presence of a causality running from financial development to energy consumption. In addition, a causality running from economic growth and urbanization to energy consumption is not found. The results can exhibit some policy implications for Turkey.