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Transition to a green economy, oil prices and the current account

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  • Juhro, Solikin M.
  • Narayan, Paresh Kumar
  • Garg, Bhavesh
  • Anugrah, Donni Fajar

Abstract

In this paper we propose and develop the hypothesis that a transition to a green economy influences the consumption-smoothing component of the current account. This is important because green economy has the potential to improve current accounts. Using a sample of 23 countries, we discover that when renewable energy consumption as a share of total final energy consumption is below the threshold value of 23.561 %, there is a negative impact of oil prices on the current account. However, the negative impact diminishes when renewable consumption exceeds this threshold. Interestingly, splitting the sample into current account surplus and deficit countries reveals that a transition to a greener economy mitigates the negative impacts of an oil price rise more so for deficit countries than surplus countries.

Suggested Citation

  • Juhro, Solikin M. & Narayan, Paresh Kumar & Garg, Bhavesh & Anugrah, Donni Fajar, 2024. "Transition to a green economy, oil prices and the current account," Energy Economics, Elsevier, vol. 139(C).
    • Handle: RePEc:eee:eneeco:v:139:y:2024:i:c:s0140988324006248
    DOI: 10.1016/j.eneco.2024.107916
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    1. Magdalena Cornejo & Michelle Hallack & Matias David, 2024. "The Transition to Renewables: Dampening the Impact of Fossil Fuel Price Shocks on Local Inflation," Working Papers 345, Red Nacional de Investigadores en Economía (RedNIE).

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    More about this item

    Keywords

    Current account; Oil prices; Renewable energy; Threshold autoregressive model;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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