Financial Development, CO2 Emissions, Fossil Fuel Consumption and Economic Growth: The Case of Turkey
Abstract
Many past studies have explored the relationships between income
and CO2 emissions; however, most have not covered the possible effects
of financial indicators on their frameworks. This study investigates the
relationships between financial development and environmental deg -
radation in Turkey from 1960 to 2011 using a multivariate framework
that focuses on economic growth and fuel consumption as additional
determinants of environmental degradation. Because a unit root test
indicated that data were not stationary, the Johansen co-integration test
was applied, revealing that the variables under investigation are co-
integrated in the long run. After establishing the long-run relationship
between variables, error correction modeling identified the long-run
and short-run coefficients of the variables. The findings show that in the
long-run, economic growth has negative and significant effect on car -
bon emissions (-0.069) while fuel consumption has positive and elastic
impact on carbon emissions (2.82). Therefore, the error correction term
implies that CO2 moves to its long-run equilibrium level at a speed of
adjustment of 16.97% by the contributions of gross domestic product
(GDP), fossil fuel consumption and financial development.
Downloads
References
Alkhathlan, K. and Javid, M. (2015, August). Carbon emissions and oil consump-
tion in Saudi Arabia. Renewable and Sustainable Energy Reviews, 48, pages 105-111.
Chen, P., Chen, S., Hsu, C. and Chen, C. (2016). Modeling the global relationships
among economic growth, energy consumption and CO2 emissions. Renewable and
Sustainable Energy Reviews, 65, pages 420-431.
Kasman, A. and Duman, Y. (2015). CO2 emissions, economic growth, energy con-
sumption, trade and urbanization in new EU member and candidate countries: a
panel data analysis. Economic Modelling, 44, pages 97-103.
Ozturk, I. and Acaravci, A. (2010). CO2 Emissions, energy consumption and eco-
nomic growth in Turkey. Renewable and Sustainable Energy Reviews, 14(9), pages
,220-3,225.
Esso, L. and Keho, Y. (2016). Energy consumption, economic growth and carbon
emissions: cointegration and causality evidence from selected African countries.
Energy, 114, pages 492-497.
Tiba, S. and Omri, A. (2016). Literature survey on the relationships between ener-
gy, environment and economic growth. Renewable and Sustainable Energy Reviews.
Kraft, J. and Kraft, A. (1978). Relationship between energy and GNP. Journal of
Energy Development (U.S.), 3(2), pages 401-403.
Al-Mulali, U. (2011). Oil consumption, CO2 emission and economic growth in
MENA countries. Energy, 36(10), pages 6,165-6,171.
Belloumi, M. (2009). Energy consumption and GDP in Tunisia: cointegration and
causality analysis. Energy policy, 37(7), pages 2,745-2,753.
Ghosh, S. (2010). Examining carbon emissions economic growth nexus for India:
a multivariate cointegration approach. Energy Policy, 38(6), pages 3,008-3,014.
Fallahi, F. (2011). Causal relationship between energy consumption (EC) and
GDP: a Markov-switching (MS) causality. Energy, 36(7), pages 4,165-4,170.
Narayan, P. and Singh, B. (2007). The electricity consumption and GDP nexus for
the Fiji Islands. Energy Economics, 29(6), pages 1,141-1,150.
Ozturk, I. (2010). A literature survey on energy-growth nexus. Energy Policy, 38(1),
pages 340-349.
Payne, J. (2010). A survey of the electricity consumption-growth literature. Ap-
Strategic Planning for Energy and the Environment
plied Energy, 87(3), pages 723-731.
Halicioglu, F. (2009). An econometric study of CO2 emissions, energy consump-
tion, income and foreign trade in Turkey. Energy Policy, 37(3), 1,156-1,164.
Hossain, M. (2011). Panel estimation for CO2 emissions, energy consumption,
economic growth, trade openness and urbanization of newly industrialized coun-
tries. Energy Policy, 39(11), pages 6,991-6,999.
Parikh, J. and Shukla, V. (1995). Urbanization, energy use and greenhouse effects
in economic development: results from a cross-national study of developing
countries. Global Environmental Change, 5(2), pages 87-103.
Pao, H., and Tsai, C. (2011). Multivariate Granger causality between CO2 emis-
sions, energy consumption, FDI (foreign direct investment) and GDP (gross do-
mestic product): evidence from a panel of BRIC (Brazil, Russian Federation, India,
and China) countries. Energy, 36(1), pages 685-693.
Sadorsky, P. (2010). The impact of financial development on energy consumption
in emerging economies. Energy Policy, 38(5), pages 2,528-2,535.
Zhang, Y. (2011). The impact of financial development on carbon emissions: an
empirical analysis in China. Energy Policy, 39(4), pages 2,197-2,203.
Claessens, S. and Feijen, E. (2007). Financial Sector Development and the Millennium
Development Goals (No. 89). World Bank Publications.
Tamazian, A., Chousa, J. and Vadlamannati, K. (2009). Does higher economic and
financial development lead to environmental degradation: evidence from BRIC
countries. Energy Policy, 37(1), pages 246-253.
Burck, J., Bals, C. and Rossow, V. (2014). The climate change performance index:
results 2014. Germanwatch Nord-Süd Initiative eV.
Ediger, V., Akar, S. and Uğurlu, B. (2006). Forecasting production of fossil fuel
sources in Turkey using a comparative regression and ARIMA model. Energy
Policy, 34(18), pages 3,836-3,846.
Zivot, E. and Andrews, D. (1992). Further evidence on the great crash, the oil-
price shock, and the unit-root. Journal of Business and Economic Statistics, 10(3),
pages 251-270.
Soytas, U. and Sari, R. (2003). Energy consumption and GDP: causality relation-
ship in G-7 countries and emerging markets. Energy Economics, 25(1), pages 33-37.
Iyke, B. (2015). Electricity consumption and economic growth in Nigeria: a revisit
of the energy-growth debate. Energy Economics, 51, pages 166-176.
Ozturk, I., Aslan, A. and Kalyoncu, H. (2010). Energy consumption and economic
growth relationship: evidence from panel data for low and middle-income coun-
tries. Energy Policy, 38(8), pages 4,422-4,428.
Pao, H. (2009). Forecast of electricity consumption and economic growth in Tai -
wan by state space modeling. Energy, 34(11), pages 1,779-1,791.
Yuan, J., Zhao, C., Yu, S. and Hu, Z. (2007). Electricity consumption and economic
growth in China: cointegration and co-feature analysis. Energy Economics, 29(6),
pages 1,179-1,191.
Paul, S. and Bhattacharya, R. (2004). Causality between energy consumption and
economic growth in India: a note on conflicting results. Energy Economics, 26(6),
pages 977-983.
d’Arge, R. (1971). Essay on economic growth and environmental quality. The
Swedish Journal of Economics, 73(1), pages 25-41.
d’Arge, R. and Kogiku, K. (1973). Economic growth and the environment. The
Review of Economic Studies, 40(1), pages 61-77.
Buttel, F. and Flinn, W. (1976). Economic growth versus the environment: survey
evidence. Social Science Quarterly, 57(2), pages 410-420.
Spring 2019, Vol. 38, No. 4
Nordhaus, W. (1977). Economic growth and climate: the carbon dioxide prob -
lem. The American Economic Review, 67(1), pages 341-346.
Ang, J. (2007). CO2 emissions, energy consumption, and output in France. Energy
Policy, 35(10), pages 4,772-4,778.
Soytas, U., Sari, R. and Ewing, B. (2007). Energy consumption, income, and car-
bon emissions in the United States. Ecological Economics, 62(3), pages 482-489.
Lotfalipour, M., Falahi, M. and Ashena, M. (2010). Economic growth, CO2 emis-
sions, and fossil fuels consumption in Iran. Energy, 35(12), pages 5,115-5,120.
Li, F., Dong, S., Xue, L., Liang, Q. and Yang, W. (2011). Energy consumption-
economic growth relationship and carbon dioxide emissions in China. Energy
Policy, 39(2), pages 568-574.
Saboori, B. and Sulaiman, J. (2013). CO2 emissions, energy consumption and
economic growth in association of Southeast Asian Nations (ASEAN) countries: a
cointegration approach. Energy, 55, 813-822.
Omri, A. (2013). CO2 emissions, energy consumption and economic growth nexus
in MENA countries: evidence from simultaneous equations models. Energy Eco-
nomics, 40, pages 657-664.
Saidi, K. and Hammami, S. (2015). The impact of CO2 emissions and economic
growth on energy consumption in 58 countries. Energy Reports, 1, pages 62-70.
Tang, C. and Tan, B. (2015). The impact of energy consumption, income and for-
eign direct investment on carbon dioxide emissions in Vietnam. Energy, 79, pages
-454.
Gokmenoglu, K., Ozatac, N. and Eren, B. (2015). Relationship between industrial
production, financial development and carbon emissions: the case of Turkey. Pro-
cedia Economics and Finance, 25, pages 463-470.
Tamazian, A. and Rao, B. (2010). Do economic, financial and institutional de -
velopments matter for environmental degradation? Evidence from transitional
economies. Energy Economics, 32(1), pages 137-145.
Jalil, A. and Feridun, M. (2011). The impact of growth, energy and financial de -
velopment on the environment in China: a cointegration analysis. Energy Econom-
ics, 33(2), pages 284-291.
Shahbaz, M., Tiwari, A. and Nasir, M. (2013). The effects of financial development,
economic growth, coal consumption and trade openness on CO2 emissions in
South Africa. Energy Policy, 61, pages 1,452-1459.
Saboori, B., Sulaiman, J. and Mohd, S. (2012). Economic growth and CO2
emissions in Malaysia: a cointegration analysis of the environmental Kuznets
curve. Energy Policy, 51, pages 184-191.
Lindmark, M. (2002). An EKC-pattern in historical perspective: carbon dioxide
emissions, technology, fuel prices and growth in Sweden 1870-1997. Ecological
Economics, 42(1), pages 333-347.
Dinda, S. (2004). Environmental Kuznets curve hypothesis: a survey. Ecological
Economics, 49(4), pages 431-455.
Akbostancı, E., Türüt-Aşık, S. and Tunç, G. (2009). The relationship between
income and environment in turkey: is there an environmental Kuznets curve? En-
ergy Policy, 37(3), pages 861-867.
Lise, W. (2006). Decomposition of CO2 emissions over 1980-2003 in Turkey. Energy
Policy, 34(14), pages 1,841-1,852.
Soytas, U. and Sari, R. (2009). Energy consumption, economic growth, and carbon
emissions: challenges faced by an EU candidate member. Ecological Econom-
ics, 68(6), pages 1,667-1,675.
Ozturk, I. and Acaravci, A. (2013). The long-run and causal analysis of energy,
Strategic Planning for Energy and the Environment
growth, openness and financial development on carbon emissions in Turkey. En-
ergy Economics, 36, pages 262-267.
Johansen, S. and Juselius, K. (1990). Maximum likelihood estimation and infer -
ence on cointegration with applications to the demand for money. Oxford Bulletin
of Economics and Statistics, 52(2), pages 169-210.
Dickey, D. and Fuller, W. (1981). Likelihood ratio statistics for autoregressive time
series with a unit root. Econometrica: Journal of the Econometric Society, 49(4), pages
,057-1,072.
Phillips, P. and Perron, P. (1988). Testing for a unit root in time series regres -
sion. Biometrika, 75(2), pages 335-346.
Kwiatkowski, D., Phillips, P., Schmidt, P. and Shin, Y. (1992). Testing the null
hypothesis of stationarity against the alternative of a unit root: how sure are we
that economic time series have a unit root? Journal of Econometrics, 54(1), pages
-178.
Elliott, G., Rothenberg, T. and Stock, J. (1992). Efficient tests for an autoregressive
unit root. The National Bureau of Economic Research, 64(4), pages 813-836.
Ng, S. and Perron, P. (2001). Lag length selection and the construction of unit root
tests with good size and power. Econometrica, 69(6), pages 1,519-1,554.
Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic
Dynamics and Control, 12(2), pages 231-254.
Engle, R. and Granger, C. (1987). Co-integration and error correction: representa -
tion, estimation and testing. Econometrica: Journal of the Econometric Society, 55(2),
pages 251-276.
Katircioglu, S., Kahyalar, N. and Benar, H. (2007). Financial development, trade
and growth triangle: the case of India. International Journal of Social Econom-
ics, 34(9), pages 586-598.
Granger, C. (1988). Some recent development in a concept of causality. Journal of
Econometrics, 39(1), pages 199-211.
Seker, F. and Cetin, M. (2015). The relationship between renewable energy con-
sumption and carbon emissions in turkey: an ARDL bounds testing approach.
Proceedings of the 17th International Academic Conference, No. 2604535, pages 382-
https://aeeeuropeenergy.com/
