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Determinants of Industrial Production in Turkey: ARDL Model

Author

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  • Bilge Pekçaglayan

    (Turkiye Vakiflar Bankasi T.A.O., Directorate of Economic Research, Istanbul, Turkey)

Abstract

In this study, it is aimed to examine the determinants of the industrial production index, which is necessary for a sustainable growth. Even though the share of the industrial sector in the total output is around 20%, it is still significant as a precursor to the gross domestic product. When the literature on the industrial production index is examined, it is seen that the factors affecting the industrial production index and the analysis methods differ from each other. In this study, the leading indicators that effects the industrial production index are examined with the ARDL (Autoregressive Distributed Lag) Model using monthly data between 2007 and 2020 in the Turkish Economy. According to the results of the study, it was concluded that the variables of electricity consumption and manufacturing industry capacity utilization rate are significant in explaining the industrial production index in the long run. The leading variable that is most effective in explaining the industrial production index in the long run is electricity consumption. Accordingly, 1% increase in electricity consumption will increase the industrial production index by 1.2%. The fact that the error correction coefficient is significant and negative in the short- term model indicates that if there is a deviation from the long-term equilibrium value in the industrial production index, the system will reach equilibrium in approximately 3.5 months.

Suggested Citation

  • Bilge Pekçaglayan, 2021. "Determinants of Industrial Production in Turkey: ARDL Model," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 71(71-2), pages 435-456, December.
    • Handle: RePEc:ist:journl:v:71:y:2021:i:2:p:435-456
    DOI: 10.26650/ISTJECON2021-972114
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Industrial production index; ARDL model; Electricity consumption JEL Classification: C01; L60; O13;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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