Renewable Energy, Economic Growth and Volatility

This dissertation investigates the impact of renewable energy adoption on macroeconomic volatility across a diverse panel of 59 developed and emerging economies over the period 1992–2021. While the environmental benefits of renewables are well established, their effects on economic volatility, particularly in terms of reducing volatility, have only recently attracted attention from researchers. By using a combination of fixed effects and dynamic panel (Arellano-Bond GMM) models, the analysis finds that increasing the share of renewable energy in a country’s energy mix significantly reduces economic volatility, especially in emerging economies where exposure to external shocks is greater. The results remain robust after accounting for fiscal balance, inflation, trade openness, financial development, and institutional quality, and after addressing missing data and outliers through imputation and outlier removal. The Subperiod analysis shows that the stabilising effect of renewable energy has become more pronounced since the 2008 global financial crisis, while comparative analysis shows that the effect is stronger in economies with weaker institutions and less diversified energy portfolios. These results show the importance of tailored policy approaches.