THE RELATIONSHIP BETWEEN ENERGY CONSUMPTION AND ECONOMIC GROWTH: COINTEGRATION AND CAUSALITY APPROACHES

With its increasing population and growing economy, Türkiye's demand for energy consumption is increasing rapidly. This study contributes to the energy-economic growth literature by examining the relationship between real gross domestic product and electricity consumption by adding the determinants of the production function in Türkiye, such as labor and capital, and using annual data for the period 1988-2019. Autoregressive Distributed Lag Bounds Test, Error Correction Mechanism and Granger Causality Test were used to evaluate the relationship between energy consumption (EC), economic growth (EG), labor, and capital in the long and short term. The results show that there is a cointegration relationship between EG and EC. The error correction coefficient is significant, and a short-term deviation recovers within a period of 2.5 years and reaches the long-term balance. Moreover, a causal relationship from EC to EG was determined. This reveals that EC plays an important role in Türkiye's EG paradigm and supports the growth hypothesis. It is suggested that policies should prioritize increasing energy investments in Türkiye in order to promote stable economic growth.