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The Transition to Renewables: Dampening the Impact of Fossil Fuel Price Shocks on Local Inflation

Author

Listed:
  • Magdalena Cornejo

    (UTDT-CONICET)

  • Michelle Hallack

    (Florence School of Regulation)

  • Matias David

    (Inter-American Development Bank)

Abstract

This paper investigates the role of renewable energy adoption in mitigating the impact of international fossil fuel shocks on local inflation. We focus on LatinAmerica and the Caribbean (LAC), a region that has the highest share of renewables in its electricity matrix, but with significant heterogeneities across countriesand over time. Our findings reveal that the renewable adoption on electricity generation has had a dampening effect of international fossil fuel price shockson local inflation. The findings underscore the positive externality of renewable energy investment and its potential to enhance economic stability. Results arerobust to different speeds of renewables adoption and matrix composition.

Suggested Citation

  • 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).
    • Handle: RePEc:aoz:wpaper:345
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    File URL: https://rednie.eco.unc.edu.ar/files/DT/345.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Energy transition; Crude oil; Gas; Inflation; LAC;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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