This paper addresses the challenges arising from the integration of renewable energy sources into microgrids, focusing on the impact on system dynamics and stability. Employing an advanced time series-based information transfer approach, the study identifies critical parameters influencing system instability under small perturbations. Unlike traditional methods, this technique effectively analyzes information flow and interactions within the complex system, providing insights into the influence of states on different operating modes. The study specifically investigates the disturbance caused by increased load demand and employs a three-layered small signal stability index to pinpoint crucial system-affecting parameters. Subsequently, Distributed Generation (DG) units are strategically placed to restore stability, guided by the identified critical parameters. The proposed approach is validated on IEEE 3 Bus and IEEE 39 Bus systems, demonstrating its effectiveness and outperforming existing methodologies in predicting and addressing system uncertainties. These systems experienced instability as a result of an introduced disturbance in the form of increased load, affecting the dynamics of the generator at the immediate bus. To enhance the generator dynamics and address the impact of the disturbance, a new DG unit was introduced to provide support. The DG unit was placed at the bus which was deduced to be most critical from the three-layered small signal stability.