Application of RALS cointegration test assessing the role of natural resources and hydropower energy on ecological footprint in emerging economy

Abstract

This paper assesses the nexus between natural resource rent, hydropower energy consumption and ecological footprint for environmental sustainability incorporating with economic performance by using yearly data from 1970 to 2017. To this end, the long run steady-state relationship among investigated variables has been analyzed by using newly established Residual Least Squares (RALS) method and confirmed for Turkish economy. The directions and magnitudes of the effects of these variables on ecological footprint were tested by using Dynamic Ordinary Least Squares (DOLS) technique. The findings, except hydropower energy consumption, reveal statistically significant and positive effects of investigated variables on ecological footprint. Moreover, the inverted U-shaped EKC hypothesis was also affirmed between economic performance and ecological footprint. The causal relationship among these variables were also tested by using VECM Granger causality test The unidirectional Granger causality relationships were found that they are running from ecological footprint, and natural resource rent to economic performance, from natural resources to ecological footprint and from natural resource rent to economic performance in Turkish economy. Additionally, the bidirectional causal relationship has been detected among economic performance and ecological footprint in Turkey. The findings highlight the importance of investigated variables on ecological footprint in Turkey.