The Causality Relationship Between Oil Consumption and Economic Growth in Turkey

Energy is one of the most important main inputs for the promoting economic growth. Most of the energy needed by the countries is mostly supplied by the sources called fossil fuel. For this reason, numbers of studies examine the linear relationship between the oil consumption and economic growth. The direction of the causality found in these studies guides the countries in their economic policies. This study attempts to empirically examine the short and the long run relationship between oil consumption and the reel gross domestic production (GDP) in the case of Turkey using the time series data for the period 1971-2013. Granger causality and Johansen cointegration test are used in order to analyze the relationship between these variables. The empirical results suggest that oil consumption and GDP are not cointegrated and there is no evidence of causality between these two variables. The main conclusion of this study is that the neutrality hypothesis is prevail for Turkey.