Hypotheses
The first set of competing hypotheses concerns the relationship
between electricity generation and GDP. These are the growth,
conservation, neutrality and feedback hypotheses. These hypotheses,
which have been considered in the energy use-GDP nexus
literature, have important policy implications. If there is unidirectional
Granger causality running from GDP to electricity generation
or no Granger causality in either direction, it may be implied that
energy conservation policies have little or no adverse effect on
economic growth. On the other hand, if unidirectional Granger
causality runs from electricity generation to GDP, reducing electricity
generation in the market could lead to a fall in income, while
increases in electricity generation contribute to economic growth.