income elasticities of energy.
In these pioneering studies, some papers empha-sized energy as a major factor of production. R. Rasche and J. Tatom’s work determined that the increase of energy prices stimulated the decreasing trends ongross national product (GNP) by using energy, land, labor, and capital.
J. Kraftand A. Kraft, A. Akarca and T. Long, E. Yu and J. Choi, and U. Erol and E. Yuanalyzed the causality relationship between electricity/energy consumption and economic growth.
Subsequent studies that followed examined the causality be-tween electricity consumption and economic growth in various countries and regions.When reviewing the results obtained from the academic research regarding therelationship between electricity consumption and economic growth, it was found that different conclusions about the direction of causality are obtained. The dif-ferences in these causality results can be categorized into four hypotheses:‘‘neutrality hypothesis,’’ ‘‘conservation hypothesis,’’ ‘‘growth hypothesis,’’ and ‘‘feedback hypothesis.’’ (1) The
suggests that there is nocausality between economic growth and energy (electricity) consumption. (2) The
states that a bi-directional causality exists running betweeneconomic growth and energy (electricity) consumption and between energyconsumption and economic growth. (3) The
asserts thatcausality is uni-directional running from economic growth to energy (electricity)consumption. When causality runs from economic growth to energy consumption,an economy is less dependent on energy; thus, energy conservation policies, suchas phasing out energy subsidies, may not adversely affect economic growth. (4)The
evaluates the existence of uni-directional causality fromenergy (electricity) consumption to economic growth.
According to the growthhypothesis, a state’s economy is energy dependent. In this case, the reduction of energy (electricity) consumption will lead to a decline in economic growth be-cause energy consumption is a prerequisite for this growth; thus, energy is a directinput in the production process and/or is an indirect input that complements labor and capital inputs. This implies that a negative shock to electricity consumptionleads to higher electricity prices or electricity conservation policies and, in turn,will have a negative impact on GDP.
To date, energy economists primarily have focused on causality between en-ergy and economic growth in European and Asian countries, with relatively fewer studies concentrating on African nations (A. Akinlo, A. Kouakou, N. Odhiambo,C. Jumbe, Y. Wolde-Rufael, G. De Vita et al., J. Squalli, K. Jefferis, M. Belloumi,S. Nondo et al., and C. Adebola).
These papers primarily utilized conventionalmethods of analysis: autoregressive distributed lag (ARDL), Johansen and EngleGranger cointegration, and the like. However, these methods are not suitable whenattempting to model business cycle conditions. With these approaches, the pa-rameters are assumed to be constant over the sample period, which means therelationship between GDP and energy and/or electricity consumption is assumed THE JOURNAL OF ENERGY AND DEVELOPMENT180