Exploring the role of renewable energy and carbon dioxide emissions for sustainable current account balance under the shadow of energy crisis: evidence from OECD countries.

Abstract

Considering the substantial environmental and economic consequences, countries worldwide have placed renewable energy at the forefront of their priorities. While previous empirical research has extensively explored the link between renewable energy and economic growth, this study seeks to address an overlooked aspect by investigating the potential impact of a particular indicator on economic activity. This paper examines the relationship between current account balance and renewable energy in OECD countries using an autoregressive distributive lags (ARDL) model to explore symmetric relationships and the non-linear autoregressive distributive lag model (NARDL) approach and panel vector autoregression (P-VAR) model over the period 1995-2020. The results indicate that there is a cointegrating relationship and that renewable energy consumption has a positive impact on the current account balance in the long term, but no significant impact in the short term. Given that many OECD countries are struggling with deficits, prioritizing bioenergy trade would be beneficial to increase the current account surplus.