Analyzing Energy Consumption and Gdp Nexus Using Maximum Entropy Bootstrap: the Case of Turkey

Abstract

We employ a maximum entropy bootstrap based framework to analyze the energy consumption and real GDP nexus between 1950 and 2006 in Turkey. Our approach provides more accurate inference in comparison to conventional hypothesis tests based on asymptotic theory. It also avoids preliminary testing and shape-destroying transformations such as differencing and detrending. The bivariate analysis as well as a multivariate framework controlling for exchange rate and oil prices shows no evidence of a causal relation. Our results are robust to both the number of lags and the time period chosen. We also perform a cointegration analysis of the data and point out a common misunderstanding in the literature regarding the concept of causation. (c) 2010 Elsevier B.V. All rights reserved.