The Relationship Between Exchange Rate and Renewable Energy Consumption in EU Economies: A Panel Bootstrap Causality Analysis

Year 2025, Volume: 4 Issue: 1, 18 - 33, 30.06.2025

Merve Güngör Parlakyiğit , Eda Dineri

https://doi.org/10.5281/zenodo.15732741

Abstract

In addition to frequently discussed economic problems such as fluctuations in energy costs and elimination of exchange rate fluctuations, there are also recent environmental problems such as global warming and climate change, and one of the policy recommendations that can be implemented to eliminate these problems is to increase the use of renewable energy sources. Within this context, the present study aims to investigate the interaction between renewable energy consumption and exchange rates. Furthermore, the analysis incorporates key economic determinants of exchange rates, namely the inflation rate and gross domestic product (GDP). This study aims to analyze the causal relationships between the exchange rate, renewable energy, inflation rate, and GDP in fifteen EU countries over the period 1995–2020, using the Panel Bootstrap Causality Analysis developed by Kónya (2006). The empirical findings reveal a bidirectional Granger causality between renewable energy consumption and exchange rates at the panel level for the selected EU countries. Additionally, the results indicate a unidirectional Granger causality from GDP to exchange rates, while no causal relationship is found between inflation and exchange rates. At the individual country level, the direction and significance of causality relationships vary, reflecting country-specific dynamics. These results suggest that the green transformation initiatives pursued by EU countries—particularly under the European Green Deal and the REPowerEU plan—may also contribute to enhancing exchange rate stability through increased reliance on renewable energy.

Keywords

Exchange Rate , Renewable Energy , Economic Growth , Inflation , Panel Data Analysis

AB Ekonomilerinde Döviz Kuru ile Yenilenebilir Enerji Tüketimi Arasındaki İlişki: Panel Bootstrap Nedensellik Analizi

Abstract

Enerji maliyetlerindeki dalgalanmalar ve döviz kuru oynaklıklarının giderilmesi gibi sık gündeme gelen ekonomik sorunların yanı sıra son dönemlerde küresel ısınma ve iklim değişikliği gibi çevresel sorunlar ve bu sorunları ortadan kaldırmak için uygulanabilecek politika önerilerinden biri olan yenilenebilir enerji kaynaklarının kullanımının artırılması yer almaktadır. Bu bağlamda yenilenebilir enerji ile döviz kuru etkileşiminin araştırılması hedeflenmektedir. Aynı zamanda döviz kurunun ekonomik belirleyicilerinden olan enflasyon oranı ve GSYH ile etkileşimi de analize dahil edilmektedir. On beş AB ülkesinde 1995-2020 dönemini kapsayan bu çalışmada Kónya (2006) tarafından önerilen Panel Bootstrap Nedensellik Analizi yardımıyla döviz kuru, yenilenebilir enerji, enflasyon oranı ve GSYH arasındaki nedensel bağları analiz etmek bu çalışmanın amacıdır. Çalışmadan elde edilen bulgular doğrultusunda model bazında onbeş AB ülkesi için yenilenebilir enerji tüketimi ve döviz kuru arasında çift yönlü bir Granger nedensellik ilişkisi mevcuttur. Aynı zamanda GSYH’den döviz kuruna doğru tek yönlü bir Granger nedensellik gözlemlenmiştir. Enflasyon ve döviz kuru arasında ise herhangi bir nedensel ilişkiye rastlanmamıştır. Ülke bazında elde edilen nedensellik ilişkileri ise nedenselliğin yönü ve anlamlılığı bakımından ülkeler arasında farklılık göstermektedir. Elde edilen analiz sonucuna göre AB ülkelerinin yenilenebilir enerji politikalarını Avrupa Yeşil Mutabakatı kapsamında ve REPowerEU planını dikkate alarak yenilenebilir enerji temelli attıkları yeşil dönüşüm adımları aynı zamanda bu ülkelerdeki döviz kuru istikrarına katkı sağlayacağı düşünülmektedir.

Keywords

Döviz Kuru , Yenilenebilir Enerji , Enflasyon , Ekonomik Büyüme , Panel Veri Analizi.

Ethical Statement

Etik onay izni gerektirmemektedir.

References

• Becker, B., & Fischer, D. (2013). Promoting renewable electricity generation in emerging economies. Energy Policy, 56, 446-455. https://doi.org/10.1016/j.enpol.2013.01.004
• Belaïd, F., & Zrelli, M. H. (2019). Renewable and non-renewable electricity consumption, environmental degradation and economic development: Evidence from Mediterranean countries. Energy Policy, 133, 110929. https://doi.org/10.1016/j.enpol.2019.110929
• Breusch, T. S., & Pagan, A. R. (1980). The Lagrange multiplier test and its applications to model specification in econometrics. The Review of Economic Studies, 47(1), 239-253. https://doi.org/10.2307/2297111
• Chudik, A., & Pesaran, M. H. (2015). Common correlated effects estimation of heterogeneous dynamic panel data models with weakly exogenous regressors. Journal of Econometrics, 188(2), 393-420. http://dx.doi.org/10.1016/j.jeconom.2015.03.007
• Deka, A., & Cavusoglu, B. (2022). Examining the role of renewable energy on the foreign exchange rate of the OECD economies with dynamic panel GMM and Bayesian VAR model. SN Business & Economics, 2(9), 119. https://doi.org/10.1007/s43546-022-00305-3
• Deka, A., & Dube, S. (2021). Analyzing the causal relationship between exchange rate, renewable energy and inflation of Mexico (1990–2019) with ARDL bounds test approach. Renewable Energy Focus, 37, 78-83. https://doi.org/10.1016/j.ref.2021.04.001
• Deka, A., Cavusoglu, B., & Dube, S. (2022). Does renewable energy use enhance exchange rate appreciation and stable rate of inflation? Environmental Science and Pollution Research, 1-10. https://doi.org/10.1007/s11356-021-16758-2
• Deka, A., Cavusoglu, B., Dube, S., Rukani, S., & Kadir, M. O. (2023b). Examining the effect of renewable energy on exchange rate in the emerging economies with dynamic ARDL bounds test approach. Renewable Energy Focus, 44, 237-243. https://doi.org/10.1016/j.ref.2023.01.003
• Deka, A., Ozdeser, H., Cavusoglu, B., Seraj, M., & Tursoy, T. (2023a). Exchange rate stability in the emerging economies: does renewable energy play a role—A panel data analysis. Environmental Science and Pollution Research, 30(9), 23668-23677. https://doi.org/10.1007/s11356-022-23911-y
• Eurostat. (t.y.). Energy statistics - an overview. https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Energy_statistics_-_an_overview (Erişim tarihi: 1 Şubat 2025)
• Hoang, T., Thi, V., & Minh, H. (2020). The impact of exchange rate on inflation and economic growth in Vietnam. Management Science Letters, 10(5), 1051-1060. https://doi.org/10.5267/j.msl.2019.11.004
• International Energy Agency. Renewables 2024 – analysis. https://www.iea.org/reports/renewables-2024 (Erişim tarihi: 30 Aralık 2024)
• Ito, T., & Krueger, A. O. (1999). Introduction to changes in exchange rates in rapidly developing countries: Theory, practice, and policy issues. T. Ito & A. O. Krueger (Ed.), Changes in exchange rates in rapidly developing countries. NBER-East Asia Seminar on Economics, 7, 1–8. University of Chicago Press.
• Kar, M., Nazlıoğlu, Ş., & Ağır, H. (2011). Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis. Economic Modelling, 28(1-2), 685-693. https://doi.org/10.1016/j.econmod.2010.05.015
• Kónya, L. (2006). Exports and growth: Granger causality analysis on OECD countries with a panel data approach. Economic Modelling, 23(6), 978-992. doi:10.1016/j.econmod.2006.04.008
• Ma, W., Wu, T., Stan, S. E., & Gao, B. (2024). Ensuring environment sustainability through natural resources, renewable energy consumption, and inflation dynamics. Resources Policy, 90, 104676. https://doi.org/10.1016/j.resourpol.2024.104676
• Markowski, Ł., & Kotliński, K. (2023). Renewables, energy mix and inflation in the European Union countries. Energies, 16(23), 7808. https://doi.org/10.3390/en16237808
• Mohamud, I. H., Warsame, Z. A., Mohamud, A. A., Hassan, A. M., & Mohamud, I. H. (2024). Renewable energy consumption in Somalia: Assessing its ımpact on currency exchange rates. International Journal of Energy Economics and Policy, 14(6), 222-229. https://doi.org/10.32479/ijeep.15699
• Moomaw, W., Yamba, F., Kamimoto, M., Maurice, L., Nyboer, J., Urama, K., Weir, T., Bruckner, T., Jäger-Waldau, A., Krey, V., Sims, R., Steckel, J., Sterner, M., Stratton, R., Verbruggen, A., Wiser, R. (2011). Renewable Energy and Climate Change. - In: Special Report on Renewable Energy Sources and Climate Change Mitigation (SRREN), 161-208.
• Musa, N. (2021). Impact of exchange rate volatility on inflation in Nigeria. Journal of Contemporary Research in Business, Economics and Finance, 3(1), 26-38. https://doi.org/10.33094/26410265.2021.31.26.38
• Omri, A., & Nguyen, D. K. (2014). On the determinants of renewable energy consumption: International evidence. Energy, 72, 554-560. http://dx.doi.org/10.1016/j.energy.2014.05.081
• Papanikos, G. T. (2015). The real exchange rate of euro and Greek economic growth. The Journal of Economic Asymmetries, 12(2), 100-109. https://doi.org/10.1016/j.jeca.2015.04.002
• Parveen, S., Khan, A. Q., & Ismail, M. (2012). Analysis of the factors affecting exchange rate variability in Pakistan. Academic Research International, 2(3), 670.
• Patosa, J. & Cruz, A.T. (2013), “Factors Affecting Exchange Rate Movements in Selected Asian Countries”, Philippine Agricultural Economics and Development Association (PAEDA), 1-17.
• Pesaran, M. H. (2006). Estimation and inference in large heterogeneous panels with a multifactor error structure. Econometrica, 74(4), 967-1012. https://doi.org/10.1111/j.1468-0262.2006.00692.x
• Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross‐section dependence. Journal of Applied Econometrics, 22(2), 265-312. https://doi.org/10.1002/jae.951
• Pesaran, M. H. (2015). Testing weak cross-sectional dependence in large panels. Econometric Reviews, 34(610), 1089-1117. https://doi.org/10.1080/07474938.2014.956623
• Pesaran, M. H. (2021). General diagnostic tests for cross-sectional dependence in panels. Empirical Economics, 60(1), 13-50. https://doi.org/10.2139/ssrn.572504
• Pesaran, M. H., & Yamagata, T. (2008). Testing slope homogeneity in large panels. Journal of Econometrics, 142(1), 50-93. https://doi.org/10.1016/j.jeconom.2007.05.010
• Pesaran, M. H., Ullah, A., & Yamagata, T. (2008). A bias‐adjusted LM test of error cross‐section independence. The Econometrics Journal, 11(1), 105-127. https://doi.org/10.1111/j.1368-423X.2007.00227.x
• Pham, X. H., Nghiem, X. H., & Nguyen, H. M. (2025, April). Revisiting exchange rate determination ın Vietnam: Does renewable energy matter?. In International Conference on Emerging Challenges: Sustainable Strategies in the Data-driven Economy (ICECH 2024), 17-22. Atlantis Press. https://doi.org/10.2991/978-94-6463-694-9_2
• Proença, S., & Fortes, P. (2020). The social face of renewables: Econometric analysis of the relationship between renewables and employment. Energy Reports, 6, 581-586. https://doi.org/10.1016/j.egyr.2019.09.029
• Ribeiro, R. S., McCombie, J. S., & Lima, G. T. (2020). Does real exchange rate undervaluation really promote economic growth?. Structural Change and Economic Dynamics, 52, 408-417. https://doi.org/10.1016/j.strueco.2019.02.005
• Rodrik, D. (2008). The real exchange rate and economic growth. Brookings Papers on Economic Activity, 2, 365-412.
• T.C. Dışişleri Bakanlığı Avrupa Birliği Başkanlığı. (t.y.). Avrupa yeşil mutabakatı. https://www.ab.gov.tr/avrupa-yesil-mutabakati_53729.html (Erişim tarihi: 2 Şubat 2025).
• Uçar, İ.H. (2024). The impact of exchange rate volatility on the inflation rate: Evidence from Turkey. Haliç Üniversitesi Sosyal Bilimler Dergisi, 7(2), 143-191. https://doi.org/10.56206/husbd.1522248
• United Nations Framework Convention on Climate Change. (t.y.). Key aspects of the Paris Agreement. https://unfccc.int/most-requested/key-aspects-of-the-paris-agreement (Erişim tarihi: 1 Şubat 2025).
• WDI. World Development Indicators. https://databank.worldbank.org Erişim Tarihi: 12.01.2025.