Links between production and consumption of electricity with economic performance in Mexico

Abstract

Understanding the causal directions between electricity consumption (EC)/electricity production (EP) and Gross Domestic Product (GDP) is helpful for policymakers in order to design, redesign, and implement effective energy policies. Although there are many studies on this issue, no consistent conclusion exists. In this paper, we provide an updated analysis of such relationship for Mexico. We employ three causality tests and find no evidence of causal relation between EC/EP and GDP between 1965 and 2014. This has implications for the Mexican energy legislation liberalizing the electricity generation sector. Our results suggest that Mexican policymakers should consider enriching the bill by further designing policies that seek to promote enhanced generation output and capacity.