Analysis of the Effect of Energy Consumption on Current Account Deficit Using Panel Data: Evidence from the Organization of the Black Sea Economic Cooperation

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.