Institutional Quality, Foreign Direct Investment, and Renewable Energy Production: Evidence from Eastern European Countries Using a Panel VAR Model

Renewable energy is crucial for mitigating climate change, stabilizing energy prices, and preventing energy crises; however, governance quality and foreign direct investment (FDI) in promoting clean energy development are often overlooked. Renewable energy production depends on political decisions and capital, technology, and expertise provided through FDI. This paper examines how institutional quality and FDI inflows affect renewable energy production. We analyze data from 1996 to 2022 across 12 Eastern European countries with growing economies and potential for renewable energy development. Our findings reveal that these countries cannot meet the institutional quality standards and FDI inflows required for renewable energy development.