The Causality Relationship Between Natural Gas Consumption and Economic Growth in Caucasus and Central Asian Economies With Natural Gas Exporters

The Causality Relationship Between Natural Gas Consumption and Economic Growth in Caucasus and Central Asian Economies With Natural Gas Exporters

Meryem Filiz Baştürk (Bursa Uludag University, Turkey)
Copyright: © 2020 |Pages: 17
DOI: 10.4018/978-1-7998-2239-4.ch001

Abstract

In this study, the causality relationship between natural gas consumption and economic growth in the Caucasus and Central Asian economies (Azerbaijan, Kazakhstan, Uzbekistan, and Turkmenistan) exporting natural gas was investigated using the bootstrap panel Granger causality analysis developed by Kónya for the period 1993–2017. As a result of the analysis, a causality from natural gas consumption to real GDP for Azerbaijan and a causality from real GDP to natural gas consumption in Uzbekistan and Turkmenistan were found. For Kazakhstan, the authors concluded that there was a bi-directional causality between natural gas consumption and real GDP.
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The Reserves, Production And Consumption Of Natural Gas In The Caucasus And Central Asian Countries Exporting Natural Gas

The Caucasus countries of Azerbaijan, Georgia, and Armenia and the Central Asian countries of Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan, and Kyrgyzstan, are divided into two among themselves, with some countries exporting natural gas (Azerbaijan, Kazakhstan, Uzbekistan, and Turkmenistan) and some importing it (Armenia, Georgia, Tajikistan, and Kyrgyzstan). These economies achieved high growth rates in the period of 1996 – 2011. The oil and natural gas exporters achieved a growth of 7.7%, and the importers achieved 6.4%. However, the fact that the main determinant of growth is the energy sources, especially in the oil and gas exporting countries, makes the growth unstable due to fluctuations in the energy prices. The achievement of these economies to reach stable and sustainable growth rates depends on the structural reforms they will apply, strengthening and diversifying the production infrastructure (IMF, 2014: 2-5). In a sense, these economies need to change the growth model that has been effective up to the present time. Actually, the weakening observed in the growth of these economies due to external shocks, such as a fall in the commodity prices during the period of 2014 – 2016 and a decrease in the growth rates of their main trading partners (Russia and China), reveal this fact. In this context, finding new sources of growth is of great importance for these economies. The diversification of resources, increasing the foreign trade and investments, the elimination of obstacles blocking the private sector from funneling the oil and natural gas exports through different routes to Europe, and the private sector – based growth need to be supported (IMF, 2018: 1-32).

Key Terms in this Chapter

Climate Change: This refers to environmental destruction caused by solid/fossil fuel waste.

Natural Gas Importers: The countries in the Caucasus and Central Asian that import natural gas, which include Armenia, Georgia, Tajikistan, and Kyrgyzstan.

Caucasus Economies: The Caucasus economies consisting of Azerbaijan, Georgia, and Armenia.

Paris Climate Change Agreement (COP21): An agreement that the signatory countries would decrease the global temperature below 2 degrees Celcius.

Central Asian Countries: The Central Asian countries consisting of Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan, and Kyrgyzstan.

Natural Gas Exporters: The countries in the Caucasus and Central Asian that have natural gas reserves and export natural gas, which include Azerbaijan, Kazakhstan, Uzbekistan, and Turkmenistan.

Economic Growth: Economic growth refers to an increase in real GDP.

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