Can power interconnection buffer economic policy uncertainty? Evidence from countries along the Belt and Road

Abstract

Regional power interconnection significantly fosters a green economy and sustainable development. It could also promote regional collaboration. This study examines the impact of economic policy uncertainty on electricity trade among the Belt and Road countries from 2000 to 2020. The findings reveal that economic policy uncertainty positively affects electricity trade within these countries, implying that most countries secure energy supply by sustaining or increasing their power trade with other connectable countries to counteract economic policy uncertainty. Economic policy uncertainty coefficients in middle-income countries will be greater than those in high-income countries. Middle-income countries have less mature electricity markets and greater potential for interconnection growth. This study provides implications for countries along the Belt and Road if they foster regional power interconnection through infrastructure construction and regional unified standard formulation.