Does Renewable Energy Use Enhance Exchange Rate Appreciation and Stable Rate of Inflation?

Abstract The current study is aimed at investigating the causal link among the use of renewable energy, rate of currency exchange and the rate of inflation of Brazil with the ARDL model. The findings of the ECM show that in the long-run a bidirectional causal association between exchange rate and renewable energy of Brazil exists. This shows that the rate of currency exchange causes use of renewable energy, and the use of renewable energy causes the rate of currency exchange in Brazil. Inflation rate also causes renewable energy and exchange rate of Brazil in the long-run. The rate of adjustment to equilibrium is also very low, below 50%, indicating that it will take long to adjust to long-run equilibrium. In the short-run, we ascertain that renewable energy use in Brazil has a significant negative effect on the rate of currency exchange, showing that a rise in the use of renewable energy in Brazil significantly cause the exchange rate to appreciate. Thus, on top of lowering carbon-dioxide emissions and global warming effects, renewable energy use in Brazil significantly improves the currency’s value. Therefore, the use of renewable energy should be promoted and nations should shift to using renewable energy. This move will also encourage zero carbon in the future.