Nexus of innovation, renewable energy, FDI, trade openness, and economic growth in Germany: New insights from ARDL method

This study investigates the dynamic relationship between innovation (INN), renewable energy (REU) consumption, foreign direct investment (FDI), trade openness (TO), and economic growth (EG) in Germany using the Autoregressive Distributed Lag (ARDL) method. Given Germany's status as a leader in technological innovation, sustainability, and global trade, understanding these interlinkages is crucial for policy formulation. The empirical results reveal that innovation and renewable energy have a significant and positive long-run impact on economic growth, with a 1 % increase in R&D expenditure contributing substantially to GDP growth. Renewable energy consumption also demonstrates a strong positive effect, reinforcing the transition towards a sustainable economy. In contrast, trade openness and FDI exhibit significant short-term effects, influencing economic fluctuations in the immediate term but showing weaker long-term impacts. The findings highlight the importance of fostering technological advancements, expanding renewable energy adoption, and strategically managing trade and investment policies to sustain economic growth. Policy implications emphasize the need for enhanced investment in research and development, strategic trade policies, and the promotion of green energy initiatives to ensure long-term economic sustainability and resilience against external shocks.