Economic growth, energy consumption, and environmental quality nexus in Turkey: Evidence from simultaneous equation models

The present research article uses simultaneous equation modelling approach to investigate the three-way linkages between economic growth, energy consumption, and environmental quality in Turkey for the 1970 to 2014 period. Further, the study uses physical capital stock, labour force, manufacturing value added, trade openness, credit to private sector, and urbanisation as control variables. The paper employs generalised method of moments (GMM) technique that ensures consistent and efficient estimates of the long-run relationship. The econometric approach controls for nonstationarity, endogeneity, cross-error correlation, and heteroscedasticity problems. Further, robustness of the results is checked by using three-stage least squares (3SLS) estimator. The statistical results of the paper support the existence of bidirectional causality between energy consumption and economic growth, CO2 emissions and economic growth, and CO2 emissions and energy consumption. Moreover, the results indicate existence of a monotonically increasing relationship between CO2 emissions and economic growth implying non-existence of Environmental Kuznets Curve hypothesis in Turkey during the sample period. The findings of the present study are of particular interest to policymakers as they help pursue economic policies to achieve sustainable development.