Energy security and economic stability: The role of inflation and war

Banna, Hasanul; Alam, Ashraful; Chen, Xihui Haviour; Alam, Ahmed W.

Abstract

This paper investigates the impact of energy security risk (ESR) on economic stability. Using multiple global datasets, we provide empirical evidence from a panel of 68 countries spanning over a period from 1980 to 2021. Our results indicate that high ESR reduces GDP growth rate (GDPG) from a global perspective. In robustness tests, this effect remains valid across several specifications based on non-U.S. samples, national income-level, alternative measure of economic stability, and a set of endogeneity tests based on propensity score matching estimation. Countries with pre-existing low GDPG mainly suffer from heightened energy insecurity. Further tests reveal that numerous country-specific institutional quality estimates moderate the effect. Finally, the damaging impact of ESR worsens during years of high inflation, geopolitical risk and acts, as well as of escalated war threats. We encourage international collaborations to develop a more sustainable energy system, which enhances the security of energy supply and the stability of economy.

Citation

Banna, H., Alam, A., Chen, X. H., & Alam, A. W. (2023). Energy security and economic stability: The role of inflation and war. Energy Economics, 126, Article 106949. https://doi.org/10.1016/j.eneco.2023.106949

• Journal Article Type: Article
• Acceptance Date: Aug 8, 2023
• Online Publication Date: Aug 14, 2023
• Publication Date: 2023-10
• Deposit Date: Mar 4, 2024
• Publicly Available Date: Mar 5, 2024
• Journal: Energy Economics
• Print ISSN: 0140-9883
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 126
• Article Number: 106949
• DOI: https://doi.org/10.1016/j.eneco.2023.106949
• Keywords: General Energy; Economics and Econometrics
• Additional Information: This article is maintained by: Elsevier; Article Title: Energy security and economic stability: The role of inflation and war; Journal Title: Energy Economics; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.eneco.2023.106949; Content Type: article; Copyright: © 2023 The Authors. Published by Elsevier B.V.