Effect of geopolitical risk and economic uncertainty indices on renewable energy

Abstract

In this study, the relationships between five renewable energy sub-sectors markets and the geopolitical risk (GPR) and economic uncertainty indices (EUI) were examined using daily data from March 30, 2012, to April 1, 2022. Convergent cross mapping results show that the renewable energy indices have definite relationships with the GPR and EUI. The renewable energy indices show differences in response directions, speed and trends for a standard information difference impulse from the GPR and the EUI. A positive dynamic conditional correlation between renewable energies and EUI was observed in the first and second waves of the COVID-19 outbreak. In contrast, there was a relatively decreased effect for two risk indices during the Russia–Ukraine conflict of February–March 2022. Our results show that renewable energy may act as a time-varying hedge against economic uncertainty and GPR owing to its safe-haven properties at various scales. Moreover, building more secure and reliable renewable energy systems can help countries to increase their energy independence, which protects them against the risks of political and economic uncertainty.

Keywords

Renewable energy / Uncertainty indices / Impulse response / Safe-haven

CRediT authorship contribution statement

Xin Zhao: Conceptualization, Writing – original draft, Writing – review & editing. Kamel Si Mohammed: Methodology, Visualization. Yaohui Wang: Conceptualization, Software, Visualization, Writing – review & editing. Paweł Stępień: Writing – review & editing, Supervision. Grzegorz Mentel: Software, Writing – review & editing.

Declaration of Competing Interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgements

This work was supported by the Ministry of Education of the People's Republic of China Humanities and Social Sciences Youth Foundation (Grant No. 22YJC910014), the Social Sciences Planning Youth Project of Anhui Province (Grant No. AHSKQ2022D138), the Anhui Province Excellent Young Talents Fund Program of Higher Education Institutions (Grant No. 2023AH030015), and the Innovation Development Research Project of Anhui Province (Grant No. 2023CX507), and the National Natural Science Foundation of China (Grant No. 71934001).

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