The Nexus Between Urbanization, Renewable Energy, Financial Development, and Economic Growth: Evidence from Turkey

Abstract

This study aims to analyze the relationship between renewable energy production and financial development, urbanization, and economic growth in the 1980-2020 period of the Turkish economy, which draws attention to its high growth rate. Methodology: To determine the relationship between financial development, economic growth, urbanization, and renewable Energy, ARDL cointegration analysis, cointegration regression models, and Toda Yamamoto causality analysis will be applied using 1980-2020 period data. Results/Findings: The ARDL boundary test shows a long-run relationship between financial development, economic growth, urbanization, and energy consumption under structural breaks. According to the cointegration regression model results, renewable energy production is determined by financial development and per capita GDP. Toda Yamamoto causality analysis shows the existence of causality running from financial development, per capita GDP, and urbanization variables to renewable energy production. The results reveal that in determining Turkey long-term energy demand projections and strategies of Turkey's, it is necessary to consider both the impact of financial development and economic growth and the supply of energy needs with sustainable resources by minimizing foreign dependency. Originality and Practical Implications: According to the government's estimates, electricity consumption is expected to reach 370 TWh in 2025 and 591 TWh in 2040. These developments reveal the importance of energy consumption in the Turkish economy and make it necessary to investigate the factors affecting energy production.