The relationship between energy and production: Evidence from Turkish manufacturing industry

Soytas U., Sari R.

ENERGY ECONOMICS, vol.29, no.6, pp.1151-1165, 2007 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 29 Issue: 6
  • Publication Date: 2007
  • Doi Number: 10.1016/j.eneco.2006.05.019
  • Journal Name: ENERGY ECONOMICS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.1151-1165
  • Keywords: energy consumption, output, Granger causality, cointegration, VEC, MULTIVARIATE COINTEGRATION ANALYSIS, IMPULSE-RESPONSE ANALYSIS, ERROR-CORRECTION, ECONOMIC-GROWTH, REAL INCOME, CAUSAL RELATIONSHIP, TEMPORAL CAUSALITY, TIME-SERIES, UNIT-ROOT, CONSUMPTION
  • Middle East Technical University Affiliated: Yes

Abstract

This paper investigates the relationship between energy and production at the industry level in an emerging market, Turkey, in a multivariate framework. The electricity consumption and value added relation is examined in the Turkish manufacturing industry, while also accounting for labor and fixed investment. We find that labor, fixed investment, electricity consumption, and value added are related via three cointegrating vectors. The VEC results indicate uni-directional causality running from electricity consumption to value added. Generalized impulse response and variance decomposition analyses confirm these results. Thus, energy input appears to be closely related to production. Hence, energy saving technologies and increased energy efficiency may increase the growth in manufacturing value added. (c) 2006 Elsevier B.V. All rights reserved.