Do U.S. Interest Rates, Oil Prices, Economic Growth, and Domestic Interest Rates Affect Renewable Energy in Germany? New Insights from the NARDL Approach
DOI:
https://doi.org/10.57125/FEL.2026.09.25.04Keywords:
Renewable energy, interest rate, oil price, economic growth, NARDL, GermanyAbstract
Germany’s energy transition depends not only on domestic policy commitment but also on stable financing conditions and resilience to external monetary and commodity-market shocks. This study examines the asymmetric short- and long-run effects of U.S. interest rates, Brent oil prices, German interest rates, and economic growth on renewable energy consumption in Germany, using annual data from 1970 to 2021. To the best of the author’s knowledge, this is one of the first studies to apply a nonlinear autoregressive distributed lag (NARDL) framework to the German case with this combined set of external and domestic macro-financial determinants. The bounds F-test confirms a long-run equilibrium relationship (F = 70.48, significant at the 1% level), and Wald tests reject symmetry in both the short and long run (p < 0.01); the error-correction term is negative and significant (−0.841), indicating that about 84% of any deviation from equilibrium is corrected within one year. Short-run economic growth is initially associated with lower renewable energy consumption (contemporaneous coefficient −0.149) but with strong positive lagged responses (up to +2.796), consistent with reliance on fossil-fuel infrastructure in the short term and renewable expansion over the long run. Oil-price shocks display clear asymmetry: positive changes reduce renewable consumption (coefficients −0.325 to −0.385), whereas negative changes raise it (0.099 to 0.395), reflecting input-cost and substitution channels. Responses to U.S. interest-rate shocks are lagged and predominantly negative (−0.283 to −0.556), implying that global monetary tightening is transmitted to Germany’s renewable-energy sector through financing and cost channels, and German interest-rate shocks likewise have time-varying asymmetric effects. The findings show that Germany’s renewable energy sector remains vulnerable to macroeconomic and financial instability despite its strong policy framework, and they endorse counter-cyclical green investment policies, more comprehensive domestic green-finance instruments, and strategies to strengthen financing resilience against external shocks. These insights may also guide other advanced, energy-importing nations exposed to comparable fluctuations in global interest rates and commodity prices.
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