Evaluation of the relationship between energy dependency and current account deficit in Turkey

Abstract

In developing countries, depending on the development and economic growth process, rising technological activities through the acceleration of industrialization have increased the need for energy. The increase in energy consumption has risen energy imports and current account deficit in countries with insufficient supply of primary energy resources. Turkey, which has an inadequate fossil energy supply, has to spend a significant part of its GDP on foreign energy inputs to increase its development rate. This, in turn, is effective in increasing foreign dependence on energy and the current account deficit. In this study, the relationship between energy dependence and current account deficit for the period 1990-2020 was analyzed with ADF, PP, and LS Unit Root Tests, Hacker, and Hatemi-J Symmetrical Time-Varying Causality Tests. According to the test results, it has been determined that there is a causal relationship between energy dependency and current account balance in the 1995-2007, 2000-2010 and 2010-2019 periods, and from the current account balance to energy dependence in the 1998-2007 and 2008-2017 periods. In this context, it is vital to focus energy policies on alternative energy investments for diversifying energy resources and increasing their efficiency for realizing the development and economic growth targets in Turkey. By doing so, it will be possible to reduce energy dependence and current account deficit by increasing alternative energy investments and production.