Crude oil price changes, renewable energy and macroeconomic dynamic spillovers in India: a time-varying connectedness approach

For an energy import-reliant economy, changes in renewable energy output, crude oil prices, inflation, exchange rates, and the trade deficit during periods of uncertainty must be analysed to determine how the energy transition will affect the open-economy factors. The paper evaluates time-varying interactions among crude oil returns, renewable energy production growth, trade deficit growth, inflation growth and currency volatility within the Indian economy using a time-varying parameter vector autoregression. The results reveal inflation growth is the dominant net transmitter of shocks, highlighting its central role in propagating disturbances across the energy–macroeconomic nexus.Renewable energy growth is now a major macroeconomic driver, acting as a core system transmitter rather than just a passive variable. In contrast, the trade deficit acts as the principal net receiver, reflecting its sensitivity to developments in energy markets, inflationary pressures and exchange-rate conditions. The connectedness structure is highly regime-dependent, with the COVID-19 period exhibits the highest level of connectedness.Structural changes in spillover dynamics of the variables are also observed a. These findings suggest that strengthening price stability, monitoring renewable energy deployment, and reducing dependence on imported fossil fuels and resorting to currency hedges can enhance resilience to external shocks and mitigate trade deficits and exchange-rate pressures.