Can Renewable Energy Investments Be a Solution to the Energy-Sourced High Inflation Problem?

Introduction

Inflation causes the uncertainty in the country's economy to rise. This situation worries investors. The reason for this is that it is difficult to predict the prices of goods in the market for the future because of inflation. This leads to a decrease in investments (Mukhtarov et al., 2022). As a result, the stability of the country's economy deteriorates. Thus, the problem in the country's economy grows even more. In summary, the inflation problem needs to be solved. One of the most important causes of high inflation problem is energy. In other words, due to the increase in energy prices, the prices of other goods in the country also increase (Zhang et al., 2022). The reason for this is that energy, which is one of the most important raw materials, is effective in the formation of the price of each commodity.

Therefore, it is also important for countries to have their own energy resources and to manage the high inflation problem. This situation is even more difficult for countries that do not have energy resources such as oil and natural gas within their borders (Dong et al., 2022). Since these countries are dependent on foreign energy, they cannot interfere with the increase in energy prices. In this context, the use of renewable energy is important for these countries. Since natural resources such as sun and wind are taken into consideration in these types of energy, renewable energies mean the country's own energy (Dinçer et al., 2022). Therefore, renewable energy resources can be increased to effectively combat the high inflation problem.

Turkey is also a country dependent on foreign energy in terms of energy. In parallel, Turkey has been struggling with the problem of high inflation for a long time. In this study, the relationship between renewable energy and inflation is examined. Within this framework, Turkey is taken into consideration. In this context, the data regarding inflation rate and renewable energy usage for the years between 1990 and 2020 is examined. This data is obtained from the website of World Bank. Engle Granger cointegration analysis is considered to examine the relationship between these factors.