[Paper Review] Can Renewable Energy Mitigate Inflationary Pressures from Energy Imports? Evidence from Türkiye

Emre Akusta|arXiv (Cornell University)|Mar 23, 2026

Market Dynamics and Volatility0 citations

TL;DR

The study analyzes whether renewable energy can reduce inflation driven by energy imports in Türkiye, finding that energy imports and the exchange rate push inflation up, while renewable energy and its interaction with imports lower it, with robust results across several estimators.

ABSTRACT

This study analyses the potential of renewable energy to reduce inflationary pressures arising from energy imports in Turkiye. Annual data for the period 1980-2022 are used in the analysis. In this study, unit root properties are examined using the Zivot-Andrews and Lee-Strazicich tests, both of which explicitly account for structural breaks. Cointegration is investigated via the Johansen and Hatemi-J cointegration tests. Long-run coefficients are subsequently estimated using the DOLS and FMOLS estimators. The robustness of the empirical findings is further assessed using the ARDL approach. In addition, an interaction term is constructed to measure the impact of renewable energy in alleviating inflationary pressures arising from energy imports. The results show that energy imports and exchange rate have an increasing impact on inflation, while renewable energy and the interaction term have a decreasing impact. DOLS, FMOLS, and ARDL results support each other. Moreover, in both models, the impact of renewable energy in mitigating inflationary pressures stemming from energy imports is stronger than the direct disinflationary impact of renewable energy.

Motivation & Objective

• Motivate the policy question of whether renewables can mitigate inflationary pressures from energy imports in Türkiye.
• Establish long-run relationships between inflation, energy imports, exchange rate, and renewable energy using Turkish data (1980–2022).
• Test robustness of findings with multiple econometric approaches (DOLS, FMOLS, ARDL) and structural breaks.
• Introduce an interaction term to quantify how renewable energy moderates the inflation impact of energy imports.

Proposed method

• Use unit root tests that account for structural breaks (Zivot-Andrews, Lee-Strazicich).
• Investigate cointegration via Johansen and Hatemi-J methods.
• Estimate long-run coefficients with DOLS and FMOLS.
• Employ ARDL as a robustness check.
• Construct and estimate an interaction term measuring renewable energy’s moderating effect on energy-import–driven inflation.

Experimental results

Research questions

• RQ1 Do energy imports and the exchange rate increase inflation in Türkiye?
• RQ2 Do renewable energy and its interaction with energy imports reduce inflation?
• RQ3 Are the results robust across DOLS, FMOLS, and ARDL estimators?
• RQ4 Is the impact of renewable energy on mitigating inflation stronger than its direct disinflationary effect?

Key findings

• Energy imports and the exchange rate have a positive impact on inflation.
• Renewable energy and the interaction term have a negative impact on inflation.
• DOLS, FMOLS, and ARDL results are consistent with each other.
• The mitigating effect of renewable energy on inflation from energy imports is stronger than its direct disinflationary effect.