Analysis of the Effect of Energy Consumption on Current Account Deficit Using Panel Data: Evidence from the Organization of the Black Sea Economic CooperationEmre Kılıç, Ersin Yavuz, Şevket Pazarcı, Alican Umut
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.
Enerji Tüketiminin Cari Açık Üzerindeki Etkisinin Panel Veri Yöntemleri ile Analizi: Karadeniz Ekonomik İşbirliği Örgütü’ne Dair KanıtlarEmre Kılıç, Ersin Yavuz, Şevket Pazarcı, Alican Umut
Bu çalışmada Karadeniz Ekonomik İşbirliği Örgütü ülkeleri için cari açık ile enerji tüketimi arasındaki ilişki incelenmektedir. Bu bağlamda bağımsız değişken olarak toplam enerji tüketimi verileri kullanılmıştır. Karadeniz Ekonomik İşbirliği Örgütü ülkeleri için toplam enerji tüketimi verilerine 2014 yılına kadar erişilebilmesi nedeniyle örneklem dönemi olarak 1992- 2014 dönemi belirlenmiştir. Ekonometrik analizde ilk olarak panele ilişkin homojenlik, yatay kesit bağımlılık ve durağanlık durumları incelenmiştir. Varsayım testleri doğrultusunda seriler arasındaki eşbütünleşme ilişkisinin belirlenebilmesi için yatay kesit bağımlılığını dikkate alan Westerlund (2007) panel eşbütünleşme testinden yararlanılmıştır. Analiz sonuçları cari açık ve toplam enerji tüketiminin eşbütünleşik olduğunu göstermektedir. Bu sonuç, Karadeniz Ekonomik İşbirliği Örgütü ülkelerinde cari açık ile enerji tüketiminin uzun dönemde birlikte hareket etme eğiliminde olduğunu göstermektedir. Daha sonra enerji tüketiminin cari açık üzerindeki etkisinin yönü ve boyutunun incelenebilmesi için Pedroni (2001) tarafından önerilen ortalama grup dinamik en küçük kareler tahmincisi kullanılarak uzun dönem katsayı tahmini gerçekleştirilmiştir. Katsayı tahmin sonuçları incelendiğinde Karadeniz Ekonomik İşbirliği Örgütü ülkelerinde enerji tüketiminin cari açığı negatif yönde etkilediği yani enerji tüketimindeki artışın cari açığı arttırıcı etki yapacağı sonucuna ulaşılmıştır. Bu sonuçlar Karadeniz Ekonomik İşbirliği Örgütü ülkelerinde oluşturulması gereken enerji politikalarında oldukça önem arz etmektedir. Bu bağlamda Karadeniz Ekonomik İşbirliği Örgütü ülkelerinde cari açığı azaltmak için enerji tüketiminin kontrol altına alınması ve/veya yenilenebilir enerji kaynakları gibi enerjide dışa bağımlılık oranının azaltılmasını sağlayacak politik hamleler yapılması önerilmektedir.
In recent years, population growth, urbanization, and rising social welfare have led to increasing demand for energy. With technological development, social needs and production methods are continuously changing, and reliable energy resources are vital for all production methods, from the industrial revolution to the present. Because of the insufficiency of their energy reserves, some countries are dependent on energy-exporting countries. This circumstance may cause problems regarding current account deficit in energy importing countries. The high rate of current account deficit makes importing countries economies fragile. Many macroeconomic variables, particularly exchange rates, interest rates, inflation rates, and investment policies, are affected by current account deficit. Therefore, governments focus on the factors that cause current account deficit in relation to economic performance. Energy imports are a fundamental factor for many countries experiencing current account balance challenges. In this context, there have been an increasing number of studies on the relationship between energy consumption and current account deficit in recent years.
Countries that are members of the Organization of the Black Sea Economic Cooperation (BSEC) were chosen as the sample because these countries are consequential in terms of economic potential, population, energy supply, and demand. A literature review determined that the relationship between energy consumption and current account deficit among BSEC countries has not yet been investigated. In this context, this study contributes to the literature in terms of the sample group and the applied econometric method.
In the study, the relationship between total energy consumption and current account balance is empirically examined in terms of BSEC member countries (Azerbaijan, Bulgaria, Armenia, Georgia, Moldova, Romania, Russia, Turkey, and Ukraine). Data reference the 1992–2014 (annual) period because of limitations in the availability of recent data on the countries included in the analysis. Current account balance was used as the dependent variable and total energy consumption as the independent variable. Gauss-10 and Eviews-12 package programs were used in the methodological implementation stages.
The econometric analysis initially examined the homogeneity and cross-section dependence of the panel, applying Swamy-S (1970) homogeneity and Pesaran (2004) crosssection dependence tests. Based on the results of these tests, a second-generation crosssectional augmented Dickey Fuller (CADF) panel unit root test, proposed by Pesaran (2007), was used. The CADF test results indicate that the variables have I (1) process. To determine the cointegration relationship between series, Westerlund (2007) panel cointegration test, which considers cross-section dependence, was used. Additionally, to examine the net effect of the independent variable on the dependent variable, the average group dynamic least squares estimator, which supports the heterogeneity and cross-sectional dependence assumptions developed by Pedroni (2001), was applied.
The findings of the homogeneity and cross-section dependence tests reveal that the dataset used in the study is suitable for second-generation panel methods. Within the scope of second-generation unit root, cointegration, and estimator results, energy consumption and current account deficit variables in BSEC countries appear to be cointegrated in the long run. Further, a one-unit change in energy consumption is shown to increase the current account deficit by 17.13 units.
The findings indicate that energy consumption (i.e., energy demand) exerts pressure on current account deficit in BSEC countries. This result indicates that BSEC countries cannot adequately meet their energy needs and resort to energy imports. Among the member states, particularly for Moldova, Turkey, Armenia, and Georgia, solving the problem of foreign dependency for energy is of critical importance in the context of current account deficit. Therefore, it is extremely important for BSEC countries to increase research on fossil and renewable energy sources to mitigate current account deficit challenges.