ASSYMETRIC CAUSAL RELATIONSHIPS BETWEEN OIL PRICES, OIL CONSUMPTION AND ENVIRONMENTAL DEGRADATION IN TURKEY

Abstract

The global economy is highly dependent on oil due to its densely use as a primary energy source. For this reason, changes in oil prices can affect countries through many economic and environmental channels. Based on this motivation, in this study, the relations between oil prices, oil consumption and environmental degradation are investigated with Hatemi-J (2012) asymmetric causality analysis, which takes into account positive and negative shocks, in Turkey in the 1987-2020 periods. Empirical findings show that there are causal links between oil prices, oil consumption and environmental degradation in Turkey differs according to positive and negative shocks. According to this; negative shocks in oil consumption and positive shocks in oil prices cause positive shocks in environmental degradation, negative shocks in environmental degradation cause positive shocks in oil consumption and negative shocks in oil prices cause negative shocks in environmental degradation. Although there is no causal relationship between oil prices and oil consumption, environmental degradation is associated with both oil prices and oil consumption. These findings reveal that oil should be considered as an important component in environmental improvement policies in Turkey.