Energy demand response to the dynamics of the currency valuation: Evidence from G7 countries

[Design/methodology/approach] The study employs several traditional methodologies and the newly developed Mixed-TAR Nonlinear ARDL (MTNARDL) model to investigate long-run co-integration. Additionally, Granger causality in the quantile test is applied to enhance the robustness of the findings. [Findings] The MTNARDL model confirms the presence of long-run co-integration among all sample countries, whereas traditional methodologies fail to detect any such relationship. Furthermore, the Granger causality results reveal that the impact of exchange rate fluctuations on energy demand varies across different quantiles. [Research limitations/implications] While the study provides robust empirical insights, it is limited by the scope of available data and methodological constraints, which may require further validation in other economic settings. [Practical implications] The findings highlight the need for policymakers to design exchange rate and energy policies that account for nonlinearities and quantile-specific effects, ensuring economic stability in G7 nations. [Originality/value] This study extends the literature by integrating extreme exchange rate changes with energy demand in G7 countries, employing advanced methodologies to uncover dynamic relationships that were previously overlooked.