Disaggregate Energy Consumption and Total Factor Productivity: A Cointegration and Causality Analysis for the Turkish Economy

The aim of this study is to investigate the long and the short-run relationships between disaggregate energy consumption (i.e. alternative and nuclear, fossil and renewable) and total factor productivity growth in the Turkish economy for the period 1970-2011. To this end, ARDL bounds testing approach to cointegration and the Dolado and Lütkepohl’s Granger causality analyses were employed. Results showed that disaggregate energy consumption is cointegrated to total factor productivity growth and there exists bi-directional causal relationships among the variables in consideration. Besides, findings revealed that the share of renewable energy consumption in total energy consumption is the only energy type which positively affects total factor productivity growth in the Turkish economy. This result implies that an improvement in the share of renewable energy consumption in total energy consumption is crucial for economic efficiency.