This paper attempts to investigate the short-run and long-run relationship and causality between energy consumption and economic growth during 1960–2006 period for Turkey. Johansen and Juselius cointegration method and vector error correction model (VECM) have been employed to examine this issue. After finding cointegration among variables, a VECM is estimated and the Granger causality tests were carried out based on a VECM. The results have shown that there is no short-run causality in both energy consumption and GDP models. The results also confirmed that there is unidirectional long-run causality among variables of interest and the direction of long-run causality is running from per capita GDP to per capita energy consumption. As a result, conservation hypothesis which postulates unidirectional causality from economic growth to energy consumption is confirmed for Turkey. Taken together, these empirical findings involve valuable information for policy makers.

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Abstract:T he determinants of economic growth have been a much debated theoretical issue in the literature, especially after the endogenous growth theory of the late 1 980s. T his new theory highlights the importance of economic policies that lead to an increasing rate of return. In particular, it is argued that human capital, trade liberalization and financial development may play very important roles in the determination of economic growth. T his paper tries to empirically estimate the joint impacts of trade liberalization and financial development on economic growth for the period 1 960-2004. Instead of using common proxies for the issue, principal components analysis is employed to develop better measures (indexes) for trade liberalization, financial development and the joint effects of both. T he empirical results obtained from the J ohansen co-integration procedure show that trade liberalization, financial development and the joint impacts of both positively contributed to economic growth in T urkey for the period 1 963-2005.

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Intergovernmental grants are the main revenue source of local governments. In the fiscal decentralization literature it has been argued that fiscal disparities across the regions are accounted for in the central-government grant distribution. However, some argue that grants are given to localities to increase the reelection chances of the incumbent or to increase the votes at election. To compete with the opposition parties the incumbent party may try to allocate the grants to aligned local governments. In this paper we analyze the grant allocation in Turkey. We test empirically whether central-government's budgetary transfers to the municipalities were made on the basis of economic criteria or in accordance with the political interest of politicians, and hence the coalition government. To test the hypothesis we followed the literature but we used additional variables. Using municipal data in sixty-one provinces, we find that the desire to secure reelection motivates politicians.