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Analysis of the Effect of Energy Consumption on Current Account Deficit Using Panel Data: Evidence from the Organization of the Black Sea Economic Cooperation

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  • Emre Kilic

    (Nisantasi Universitesi, Iktisadi, Idari ve Sosyal Bilimler Fakultesi, Sermaye Piyasaları ve Portfoy Yonetimi Bolumu, Istanbul, Turkiye)

  • Ersin Yavuz

    (Pamukkale Universitesi, Iktisadi, Idari ve Sosyal Bilimler Fakultesi, Maliye Bolumu, Denizli, Turkiye)

  • Sevket Pazarci

    (Nisantasi Universitesi, Iktisadi, Idari ve Sosyal Bilimler Fakultesi, Finans ve Bankacilik Bolumu, Istanbul, Turkiye)

  • Alican Umut

    (Nisantasi Universitesi, Iktisadi, Idari ve Sosyal Bilimler Fakultesi, Ekonomi ve Finans Bolumu, Istanbul, Turkiye)

Abstract

This study examines the relationship between current account deficit and energy consumption among countries in the Organization of the Black Sea Economic Cooperation (BSEC), with total energy consumption data as an independent variable. Since data for BSEC countries are only available up to 2014, 1992–2014 is the sample period examined. Homogeneity, cross-section dependence, and stationarity conditions of the panel were examined in the econometric analysis. Westerlund (2007) panel cointegration test, which considers cross-sectional dependence, was used to determine the cointegration relationship between the series in line with the assumption tests. The analysis revealed the cointegration of current account deficit and total energy consumption, indicating that current account deficit and energy consumption tend to move together in the long run in BSEC countries. To examine the direction and size of the effect of energy consumption on current account deficit, a long-term coefficient estimation was performed using Pedroni (2001) proposed average group dynamic least squares estimator. Coefficient estimation results indicate that energy consumption in BSEC countries negatively affects current account deficit, indicating that increased energy consumption raises current account deficit. These results are essential to the development of energy policies in BSEC countries. In this context, it is recommended to establish policies to reduce current BSEC countries’ account deficit by controlling energy consumption and/or reducing the rate of external energy dependency by further integrating renewable energy sources. This study extends existing research in terms of the sample group and the econometric method applied.

Suggested Citation

  • Emre Kilic & Ersin Yavuz & Sevket Pazarci & Alican Umut, 2021. "Analysis of the Effect of Energy Consumption on Current Account Deficit Using Panel Data: Evidence from the Organization of the Black Sea Economic Cooperation," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 8(2), pages 277-291, July.
  • Handle: RePEc:ist:iujepr:v:8:y:2021:i:2:p:277-291
    DOI: 10.26650/JEPR.945175
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    References listed on IDEAS

    as
    1. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    2. Joakim Westerlund, 2007. "Testing for Error Correction in Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(6), pages 709-748, December.
    3. T. S. Breusch & A. R. Pagan, 1980. "The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 239-253.
    4. Pesaran, M. Hashem & Vanessa Smith, L. & Yamagata, Takashi, 2013. "Panel unit root tests in the presence of a multifactor error structure," Journal of Econometrics, Elsevier, vol. 175(2), pages 94-115.
    5. M. Hashem Pesaran, 2021. "General diagnostic tests for cross-sectional dependence in panels," Empirical Economics, Springer, vol. 60(1), pages 13-50, January.
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    7. Alper Aslan & Onur Gozbasi & Buket Altinoz & Mehmet Altuntas, 2021. "Impact of financial development and economic growth on energy consumption: A panel vector autoregressive analysis for the comparison of G7 and top 10 emerging market economies," Energy & Environment, , vol. 32(7), pages 1315-1330, November.
    8. Peter Pedroni, 2001. "Purchasing Power Parity Tests in Cointegrated Panels," Department of Economics Working Papers 2001-01, Department of Economics, Williams College.
    9. Peter Pedroni, 2001. "Purchasing Power Parity Tests In Cointegrated Panels," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 727-731, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Econometrics; Panel data; Current account deficit; Energy consumption; Black Sea economies JEL Classification : C23; F32; Q43;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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