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The Environmental Quality-Economic Complexity Relationship: A Fourier Cointegration Analysis of the Turkish Economy

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  • Sefa Ozbek

    (Kahramanmaras Sütcü Imam University, Faculty of Economics and Administrative Sciences, Department of Economics, Kahramanmaraş, Turkiye)

  • Mustafa Naimoglu

    (Bingol University, Faculty of Economics and Administrative Sciences, Department of Economics, Bingol, Turkiye)

Abstract

This study investigates the relationship between environmental quality and economic complexity using the variables of annual economic growth, economic complexity index, energy consumption, and ecological footprint of the Turkish economy for the 1964-2018 period. This study has preferred the Fourier autoregressive distributed lag (ADL) method, which Banerjee et al. (2017) introduced to the literature. The unit root processes of the variables added to the model were investigated using both conventional and Fourier unit root tests. As a result of the Fourier ADL cointegration test, a long-term relationship was found to exist among the variables. The fully modified ordinary least square (FMOLS) test was used to estimate the short- and long term coefficients. Empirical findings have revealed energy consumption in Turkiye during this sample period to have increased the ecological footprint both in the short and long terms. The result was obtained that economic complexity increased the ecological footprint in the short run while decreasing in the long run. Meanwhile, short-term elasticity of economic growth (0.90%) was concluded to be greater compared to long-term elasticity (0.24%), and validity of the environmental Kuznets curve (EKC) hypothesis was obtained for Turkiye.

Suggested Citation

  • Sefa Ozbek & Mustafa Naimoglu, 2022. "The Environmental Quality-Economic Complexity Relationship: A Fourier Cointegration Analysis of the Turkish Economy," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 72(72-1), pages 407-431, June.
    • Handle: RePEc:ist:journl:v:72:y:2022:i:1:p:407-431
    DOI: 10.26650/ISTJECON2022-1061837
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    References listed on IDEAS

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