Monetary policy and renewable energy production

Abstract

This paper examines the relationship between monetary policy and renewable energy. Using US quarterly data from 1990:Q1 to 2023:Q2, we employ a stylized monetary policy structural vector autoregressive model and provide evidence that monetary tightening reduces the production of renewable energy. Among different sources of renewable energy, solar energy shows the most significant response. Finally, a counterfactual policy analysis provides evidence that monetary policy can either offset or exaggerate other structural shocks on renewable energy production, depending on the sources of these shocks.