The Relationship Between Energy Consumption, Current Account Deficit and Economic Growth: The Case of Brics-T Countries

Abstract

With industrialization, energy consumption is considered as an important input for development. It is also known that the increase in energy consumption of countries has an impact on growth. However, one of the most important problems for countries that are dependent on foreign energy is the current account deficit problem. The purpose of this study is to test this effect by using panel fixed effects and panel random effects models for BRICS-T countries. The data used in the analysis covers the period 1994 to 2021. According to the econometric findings obtained with the help of Driscoll-Kraay Standard Error Model Estimation, current account deficit has a negative and significant effect on economic growth, while energy consumption has a positive and significant effect on economic growth. This result supports the growth hypothesis that an increase in energy consumption increases economic growth. According to the causality test results, there is a bidirectional causality connection between energy consumption and economic growth. There is a unidirectional causal relationship from current account deficit to economic growth. However, there is no significant causality connection between energy consumption and energy consumption.