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Does renewable energy use enhance exchange rate appreciation and stable rate of inflation?

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Abstract

The current study is aimed at investigating the relationship between the use of renewable energy, the rate of currency exchange, and the rate of inflation with the ARDL model. The findings of the ECM show that in the long run, a bidirectional association between exchange rate and renewable energy exists in Brazil. This shows that the rate of currency exchange affects the use of renewable energy, and the use of renewable energy affects the rate of currency exchange. The inflation rate also affects renewable energy and exchange rate in the long run. The rate of adjustment to equilibrium is also below 50%, indicating that it will take a long time to adjust to long-run equilibrium. In the short run, we ascertain that renewable energy use has a significant negative effect on the rate of currency exchange, showing that a rise in the use of renewable energy significantly causes the exchange rate to appreciate. The long-run results show that renewable energy use negatively impacts exchange rate (appreciation), while the inflation rate and rate of currency exchange significantly affect the use of renewable energy positively. Thus, in addition to lowering carbon dioxide emissions and global warming effects, renewable energy use also facilitates an improvement in the currency’s value. Therefore, the use of renewable energy should be promoted, and nations should shift to the use of renewable energy. This will also promote zero carbon in the future.

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Availability of data and materials

The data used in this paper is secondary data and were retrieved from the Organization for Economic Co-operation and Development (OECD) website, www.oecd.org.

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Authors and Affiliations

  1. Economics Department, Near East University, North, 99138, Nicosia, Cyprus

    Abraham Deka & Behiye Cavusoglu

  2. International Relations Department, Near East University, North, 99138, Nicosia, Cyprus

    Sindiso Dube

Authors
  1. Abraham Deka
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  2. Behiye Cavusoglu
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  3. Sindiso Dube
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Contributions

AD: conceptualization, methodology, writing – original draft, software. BC: data curation, writing – review and editing, supervision. SD: visualization, investigation.

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Correspondence to Abraham Deka.

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Deka, A., Cavusoglu, B. & Dube, S. Does renewable energy use enhance exchange rate appreciation and stable rate of inflation?. Environ Sci Pollut Res 29, 14185–14194 (2022). https://doi.org/10.1007/s11356-021-16758-2

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