Oil Prices, Macroeconomic Performance, and Sustainability: The Case of Turkey

Introduction

Energy is fundamental for economic and social enlargement and improving the quality of life in all countries (Keser, 2003). However, most of the world's energy sources are produced and consumed yet unsustainably of technology remains stable and total amounts of energy demand increase significantly. Energy production and consumption vary according to the development levels of countries. Energy consumption in developed countries is much higher than it is in developing countries (Amri, 2016). At the same time, energy supply and demand, which decides the unit price of important energy sources such as oil, coal, and natural gas, varies depending on the global economic and political conjuncture. When energy resources are evaluated as an alternative investment tool, energy prices are shaped by non-market factors, speculative trends, and expectations as well as domestic market dynamics. In this context, price increases will inevitably affect the energy demand of most energy-consuming countries. However, the continuous increase in energy prices at the national or international level does not mean that the energy demand or consumption in these economies will decrease in the same way. Although energy prices in a country constantly increase, energy use in this country is not as low as the price elasticity of energy demand; in other words, energy demand is less sensitive to price changes (Esen and Bayrak, 2015).

Among the energy resources, oil has an important place in the economies of the countries because the relationship between the economic performance of the countries and oil prices is quite high. It is seen that the changes in oil prices according to the types of national economies affect the country's economies positively or negatively (Mukhtarov et al. 2020). When the literature is examined, some studies reveal a negative relationship between oil prices and economic growth (Mahmood and Murshed, 2021; Van Eyden, 2019; Aimer and Moftah, 2016; Nazir and Qayyum, 2014; Ghalayini, 2011; Bhusal, 2010; Hanabusa, 2009; Jiménez-Rodríguez and Sánchez, 2005). Nevertheless, some studies found oil prices to increase economic growth (Alkahteeb & Sultan, 2019; Benramdane, 2017; Akinlo and Apanisile, 2015; Okoro, 2014; Berument et al. 2010). According to the findings of the studies in the literature, oil prices affect the economy positively in oil-importing countries, and oil prices negatively affect economic growth in developing countries (Kiani, 2011). As can be seen, the change in oil price produces different results in oil-importing and exporting countries. The increase in oil prices increases the foreign exchange income in oil-exporting countries, raises the real income level, and creates a current account surplus (Gundogan and Tok, 2019). In other words, the rise in oil prices increases the input costs, decreases the foreign exchange reserves, increases the current account deficit, and decreases real incomes in importing countries with high oil dependency (Iwayemi and Fowowe, 2011). In countries such as Turkey, which is an oil-importing country, oil price increases can cause macroeconomic instability. It is seen that the fluctuation in oil prices has a great effect on Turkey's macroeconomic variables. In this context, the effect of oil price on economic growth, inflation, interest, unemployment, and import in Turkey is investigated in this study.