Renewable Energy, Energy Import Dependence, and Trade Balance in Türkiye

Abstract

This paper analyzes how renewable energy use and dependence on imported energy influence Türkiye’s trade balance. The study is grounded in the argument that economies relying heavily on imported fossil fuels are more exposed to external balance pressures, whereas domestic renewable energy use may help reduce this exposure by replacing part of imported energy demand. Economic growth and the real exchange rate are added as control variables in order to capture demand-side conditions and relative price movements in foreign trade. The empirical investigation is based on annual data for Türkiye and applies a time-series methodology that allows for structural shifts and long-run linkages. First, the integration order of the series is examined through the ADF and Fourier ADF tests. The long-run connection among the variables is then assessed by employing the RALS Fourier ADL and Gregory–Hansen cointegration approaches. After confirming cointegration, the long-run parameters are obtained through the DOLS estimator, and causal linkages are explored with the Fourier Toda–Yamamoto procedure. The results show that renewable energy contributes positively to Türkiye’s trade balance, while energy import dependence has a deteriorating effect. The causality evidence also points to a two-way interaction between renewable energy use and the trade balance. Overall, the findings indicate that renewable energy can support the trade balance by easing Türkiye’s dependence on imported energy.