The Causality Relationship Between Electricity Consumption and Growth in Türkiye: MS-Granger Approach
Chapter from the book: Çevik, E. İ. & Kırcı Altınkeski, B. (eds.) 2023. New Approaches in Granger Causality Testing.

Funda Durgun
Dicle University

Synopsis

In this study, the causality relationship between electricity consumption and economic growth was investigated by using the regime-dependent Granger (MS-Granger) method based on the Markov-Switching VAR model, which is one of the new approaches in Granger causality testing. The variables used in the analyzes were not linear and were stationary at their first difference. Since the MS-Granger method is calculated depending on the regimens, the Markov-Switching VAR (MS-VAR) model was estimated first. The estimated MS-VAR model has two regimes and the lag length is determined as one. The regimes obtained according to the model are named as low growth period (first regime) and high growth period (second regime). With the help of these regimes, the MS-Granger causality test was estimated. According to the results obtained, one-way causality relationship from electricity consumption to economic growth in the high growth period was found to be significant. This result confirms the growth hypothesis. In this context, electricity consumption contributes to economic growth. Therefore, the implementation of protectionist policies (such as restricting the use of electrical energy and/or saving energy) will negatively affect economic growth. In order to support economic growth, it is necessary to make regulations to increase electricity consumption.

How to cite this book

Durgun, F. (2023). The Causality Relationship Between Electricity Consumption and Growth in Türkiye: MS-Granger Approach. In: Çevik, E. İ. & Kırcı Altınkeski, B. (eds.), New Approaches in Granger Causality Testing. Özgür Publications. DOI: https://doi.org/10.58830/ozgur.pub64.c424

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Published

March 24, 2023

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