The regulatory power of fiscal and monetary policies in driving renewable energy: The moderating influence of political stability in belt and road initiative countries

Abstract

The government's policies on developing energy strategies have received much attention in empirical research. As such, fiscal and monetary policies can drive renewable energy. To this end, the current study proposes a new dimension in the empirical framework by regressing the fiscal and monetary policy variables on renewable energy under the moderating effect of political stability for the 71 “Belt and Road Initiative (BRI)” nations between 2000 and 2022. This research designs static and dynamic STIRPAT models to determine the effectiveness of lag periods. The results show that expansionary fiscal policy is instrumental in driving renewable energy development; in contrast, the contractionary monetary policy aligns with a reduction in renewable generation in the selected BRI countries. The moderating role of political stability in driving the monetary policy-renewable energy development and fiscal policy-renewable energy in these countries remain instrumental. The outcomes were reaffirmed by changing the estimator, testing the relationship with different fiscal and monetary policy indicators, and using the asymmetric analysis of the benchmark model to support the regression results. Finally, it discusses various policy proposals to the policymakers of BRI countries for practice.