Multivariate time-frequency interactions of renewable and non-renewable energy markets with macroeconomic factors in India

Renewable-energy and non-renewable-energy markets have different stabilities, with renewable-energy markets more volatile in India due to the role of renewable-energy and non-renewable-energy in society, and also due to the interactions with external markets (such as macroeconomic and financial markets). These interactions are required to be studied in a tri-variate nexus, considering renewable-energy and non-renewable-energy markets as independent variables. In this study, the interactions of renewable-energy and non-renewable-energy markets with macroeconomic markets (Oil, Coal, Natural Gas, Copper, Gold, Interest Rates and Exchange Rates) from 21 December 2012 to 02 December 2022 were studied. Multiple coherence of Short-Time-Fourier-Transforms of the time-series data enabled creating the tri-variate nexuses. Our findings highlight that non-renewable-energy was correlated to stable markets, while Renewable-Energy was correlated to volatile markets, indicating dual investor behavior, with non-renewable-energy prone to long-term shareholding and renewable-energy prone to short-selling. Further, we observed that Oil, Gas and Coal markets interact significantly with renewable-energy market during financial uncertainty, providing opportunity to hedge renewable-energy and increase market stability. In the post-COVID-19 scenario, exchange rates and Gold markets were identified as critical factors for renewable-energy market stabilization in India, since the coherence frequencies decreased from high to low (high to low volatility). This affirms that investors should couple renewable-energy index to Gold and exchange rate indices during the recovery from an economic shock, which could ensure long-term shareholding behavior in the renewable-energy market.