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<p>This study examines the asymmetric relationship between renewable energy (RE), electricity consumption (EC), financial development (FD), foreign direct investment (FDI), and innovation (INN) in Luxembourg using a nonlinear autoregressive distributed lag (NARDL) approach. The analysis employs annual data and decomposes FDI, FDI, and INN into positive and negative changes to capture asymmetric adjustment dynamics. The empirical findings confirm the existence of a stable long-run relationship among the variables. EC positively affects RE in the long run, while FDI exhibits strong asymmetry, with negative financial shocks exerting larger adverse effects than the positive impact of financial expansion. Positive FDI inflows and INN shocks significantly promote RE development, whereas negative shocks have comparatively weaker effects. The results further indicate that INN plays a persistent role in supporting RE transition in Luxembourg. Based on these findings, the study recommends strengthening green financial stability mechanisms, promoting INN-oriented RE policies, and attracting sustainable foreign investment to enhance the resilience of Luxembourg’s RE sector. The findings provide important policy implications for small, highly open, and financially integrated economies pursuing sustainable energy transitions.</p>

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Renewable energy and sustainability drivers in Luxembourg evidence from electricity demand finance foreign direct investment and innovation

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2026年7月14日

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  • Bich Ngoc Nguyen,
  • Nguyen Thi Phuong Thu,
  • Thi Lan Anh Nguyen,
  • Huong Giang Luong

摘要

This study examines the asymmetric relationship between renewable energy (RE), electricity consumption (EC), financial development (FD), foreign direct investment (FDI), and innovation (INN) in Luxembourg using a nonlinear autoregressive distributed lag (NARDL) approach. The analysis employs annual data and decomposes FDI, FDI, and INN into positive and negative changes to capture asymmetric adjustment dynamics. The empirical findings confirm the existence of a stable long-run relationship among the variables. EC positively affects RE in the long run, while FDI exhibits strong asymmetry, with negative financial shocks exerting larger adverse effects than the positive impact of financial expansion. Positive FDI inflows and INN shocks significantly promote RE development, whereas negative shocks have comparatively weaker effects. The results further indicate that INN plays a persistent role in supporting RE transition in Luxembourg. Based on these findings, the study recommends strengthening green financial stability mechanisms, promoting INN-oriented RE policies, and attracting sustainable foreign investment to enhance the resilience of Luxembourg’s RE sector. The findings provide important policy implications for small, highly open, and financially integrated economies pursuing sustainable energy transitions.