The transition to renewables: dampening the impact of fossil fuel price shocks on local inflation

The transition to renewables: dampening the impact of fossil fuel price shocks on local inflation

• Author
• Magdalena Cornejo
• Co-authors
• Michelle Hallack , Davia Matias
• Abstract

• This paper investigates the role of renewable energy adoption in mitigating the impact of international fossil fuel price shocks on local inflation. We focus on

  Latin America and the Caribbean (LAC), a region that has the highest share of renewables in its electricity matrix, but with significant heterogeneities across

  countries and over time. Our findings reveal that the renewable electricity transition based on a higher share of renewable electricity generation has had a clear

  dampening effect of international fossil fuel price shocks on local inflation. The findings underscore the positive externality of renewable energy investment and

  its potential to enhance economic stability. Results are robust to different speeds of regime switching and a different definition of the transition.

• Keywords
• Oil, gas, electricity, clean energy, renewables
• Modality
• Comunicação oral
• Subject Area
• Energy and macroeconomics

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