DOES USING RENEWABLE ENERGY PREVENT GLOBAL ENERGY PRICES’ EFFECTS ON INFLATION?

Global energy price fluctuations caused by political, economic, and many other reasons create inflationary impacts, especially in importing economies that do not have fossil energy reserves. The motivation of this study is the proposition that the use of renewable energy, which reduces dependence on fossil energy sources, can provide a protective alternative against these price shocks, in addition to its environmental advantages. The aim of the study is to test whether the use of renewable energy is effective in preventing the effects of shocks in global energy prices on inflation. To this end, the effects of global energy prices on inflation for nine selected OECD countries with different levels of renewable energy use were analyzed using the structural vector autoregressive (SVAR) model. Thus, evidence is presented about the effect of differences in the level of renewable energy use on the pass-through of energy price shocks to domestic prices. Findings are presented as evidence for the proposition that the use of renewable energy will limit the effects of global energy prices on inflation.